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Ram Gopal Verma 101, Swastik Bhawan,
B.Com. (Hons.) A.I.C.W.A., F.C.A. Ranjit Nagar Commercial Complex
CHARTERED ACCOUNTANT New Delhi 110 008
FELLOW SURVEYOR Ph. : Off. 25706379
Fax : 25708963
Res. : 25790142
Cell : 98 114 13816
E-mail : rgvermaca@yahoo.com


ABOUT THE AUTHOR

The author of the book Mr. Ram Gopal Verma is a qualified Chartered
Accountant and Insurance Surveyor for about 30 years in practice. Mr. Ram
Gopal Verma was born in a place called Jalpaiguri in West Bengal.
Originally his fore fathers came from Rajasthan to West Bengal in search of
livelihood. Even now he dreams in Bengali having taken his early education
in Bengali medium. He knows German and French as well. He qualified his
C.A. from Kolkata and decided to settle in Delhi. He has handled varieties of
Insurance Claims as Insurance Surveyor with various Insurance Companies.
When even Supreme Court failed to convince itself over the definition of
Burglary and theft as interpreted by Insurance Companies, prompted him to
write this book. Even I.R.D.A. admitted that the Insurance Policy terms and
conditions are written in the most ambiguous manner prompted him further
to write this book in simple language. He believes that spread of Insurance
knowledge would benefit one and all.

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Index
Matter Page No

1. Conclusion as Preface 7

Chapter- 1

1. Introduction 10

Chapter -2 Burglary Claim

2. Papers required in case of burglary 15
Claim related to stock
2.1. Exclusions to burglary policy 23
2.2. Money not covered in case of burglary 23
2.3. Burglary from open stock yard 23
2.4. Loss has to be discovered within
14 days of incident 23
2.5. Value of insurance for computers on
depreciated value or market value 24
2.6. Theft without forcible entry or exit is not
covered in the policy 25
2.7. Roof of several building connected to each other 25
2.8. burglary season 25
2.9. Grill cut to enter in house/factory 26
2.10. Security of empty office/showroom/factories
at night 26
2.11. Proper coverage of stock 26
2.12. Coverage of stock with transporters or C & F agents 27
2.13. Theft v/s burglary as per Supreme Court. 32
2.14. Only letter to police is not F.I.R. 33
2.15. Call at no. 100 of P.C.R. 34
2.16. Daily diary (DD) register/Roj Naamcha 35
2.17 Police hierarchy 35
2.18. Investigating Officer 36
2.19. The S.H.O. 36
2.20. Crime team 37
2.21. Crime branch of the State 37
2.22. F.I.R is mandatory as per insurance company 38
2.23. What to do if F.I.R. is not registered by local police 39
2.24. Hierarchy of magistrate and courts 39
2.25. Intimation of loss to police 40
2.26. Non cognizable offence report (NCO) 41
2.27. Loss due to Dacoity / volumetric exercise 41
2.28. Burglary and volumetric analysis 42
2.29. Section 457 in final report 42
2.30. Regarding final report by police. 43
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2.31. Challan / charge sheet by police 44
2.32. Vernacular translation of F.I.R. 45
2.33. Recovery / Superdari 46
2.34. Disadvantages of taking property on Superdari
recovered 47
2.35. Mere F.I.R. not enough after thought 48
2.36. No mention of stolen stock in F.I.R. / subrogation 48
2.37. Police status report 48

Chapter 3 Fire Claim

3. Papers required in case of fire claim 49
3.1. Re. fire loss to machines 53
3.2. Re. fire loss to stock 55
3.3. Re. fire loss to building 60
3.4. what if records and books of accounts burnt in fire 60
3.5. Damaged stock should not be removed before
arrival of surveyor 61
3.6. Cause of fire 61
3.7. Loss due to water is also covered in fire policy 61
3.8. Fire / water loss in paper industry 62
3.9. Loss due to smoke or soot in plastic or
garments or fabric 62
3.10. Moral of insured and financial soundness 63
3.11. in case of doubtful fire 63
3.12. Technical report from another specialist 63
3.13. Assess loss even if claim not admissible 63
3.14. Collapse of roof in fire 64
3.15. Certain allowable exclusions for self insurance 64
3.16. Minimum deductible and voluntary deductible 64
3.17. Mid-term change in sum insured 64
3.18. add on covers 65
3.19. Loss assessment can never be exact 66
3.20. Fire policy by transporters 66
3.21. Fire season, high voltage and its after effects 67
3.22. Valuation for insurance on depreciated value
or reinstatement value of machines 68
3.23. Ask for terms and conditions a the time of renewal 69
3.24 Fate of rejected claim after 12 months. 70








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Chapter 4 Flood Loss Claim

4. Requirement of papers in case of claim of loss
due to flood 71
4.1. Loss due to flood/ inundation 72
4.2. Flood / inundation due to blockage of drain 73

Chapter 5 Shop Keepers Claim

5. All risk shop keepers policy 74
5.1. Precautions by shop keepers/ factories 74
5.2. Loss in electronic shop 75
5.3. Loss of stock from shop under section i 75
5.4. Loss of stock from shop under section ii 75
5.5. Loss of cash from premises in shop keepers policy 75

Chapter 6 C.IT. Claim

6. Requirement of papers in case of cash in transit
loss claims 76
6.1. Cash in transit / money Insurance Justification 77
6.2. Money should be in custody only 77
6.3. Cash in transit / money insurance policy 78
6.4. cash carrying staff 78
6.5. How cash to be carried how and by whom 78
6.6. Proper coverage of office/ residence/ bank and
vice versa 78
6.7. Route of cash carrying should be approximately 78
straight
6.8. Keep enough balance for year round cash in transit 78
6.9. Heavy cash break the trip to spread cash risk 79
6.10. Over night cash in safe is also covered in cit policy 79
6.11. Infidelity of cash carrying employee 79
6.12. New branch not added in policy 79
6.13. Loss from unattended vehicle 80
6.14. Risk of cash in transit 80

Chapter 7 Jewellers Block Claim

7. Jewellers block policy 81
7.1. Only cost is compensated 81
7.2. After loss settlement recovery goes to insurers 81
7.3. Safe of standard make 81
7.4. Storage of stock in safe as per proposal form 82
7.5. Stock kept out side safe at night 82
7.6. Proposal form is basis of insurance 82
7.7. Safety features of camera for jewellers 83
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7.8. Discount for safety and security 83
7.9. Stock inside grill but not in safe 83
7.10. Safe is unsafe without latest feature 84
7.11. Safe should be fixed in the wall 84
7.12. Safe is safer if there is no protruded side 84
7.13. Safe number lock not working, then its not safe. 84
7.14. Motion detector at night 85
7.15. Guard to protect factory at night time 85
7.16. Storage of stock in almirah 85
7.17. New safe bought 85
7.18. Stealing by operation of key 86
7.19. Loss due to infidelity of employee 86
7.20. Stock to other cities for sale or return 86
7.21. Stock in another safe not in strong room 86
7.22. Stock left in unattended vehicle 86
7.23. Basis of valuation 86
7.24. Important exclusions in jewellers block (JB) policy 87
7.25. Same policy for diamond manufacturers
as well as jeweller showrooms. 88
7.26. Common tricks 90
7.26.1. Dirty material on your clothes 90
7.26.2. Left side tyre puncture indication 90
7.26.3. forced accidents to stop you 90
7.26.4 Brief case on rear seat 91
7.26.5 Throw cash on road to cheat you 92
7.26.6 Not safe in car parking also 89
7.26.7. Tea with sleeping chemicals 89
7.26.8 Bus closed after getting down to deceive you 90
7.26.9. Criminals spot some one with valuables and
cheat him 90
7.26.10. Force you to have sleep using chloroform 91
7.26.11 Hypnotise you to cheat 92

Chapter 8 House Hold Claim 93

8. All risk house hold insurance policy
8.1. Rate of gold jewellery 94
8.2. All risk cover for jewellery in house hold policy. 95
8.3. Valuation report 96
8.4. Papers required in case of claim related to
house hold policy 98
8.5. Regarding gold jewellery and silver items 98
8.6. Regarding loss of crockery and garments 99
8.7. Small electronic safe in houses 99



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Chapter 9 Misc. Policies claims 100

9. Other important insurance policies
9.1. Loss due to LPG cylinder explosion 100
9.2. Separate building policy for
Earth quake long term 100
9.3. Loan linked insurance policy for borrowers
from bank 101
9.4. Personal accident (P.A.) policy 102
9.5. Mediclaim Policy 103
9.6. Name difference in medical policy 104
9.7. Age in case of mediclaim policies 105
9.8. Name difference in medical policy 105
9.9. Age in case of mediclaim policies 106
9.10. Approval of limit by TPA in case of hospitalisation 106


Chapter 10 Car Claims

10. Car insurance claims 109
10.1. Car theft cases 110
10.2. Insured declared value (I.D.V.) 111
10.3. Very little car protection from theft 112
10.4. Additional car cover 112
10.5. Regarding car insurance and sale of car 113
10.6. Depreciation in car claims 114
10.7. Car policy exclusions 114
10.8. Status of learners licence for claims 114
10.9. Bargain for better coverage of car insurance
and not bargain for less premium 115
10.10. Third party claim for car accidents/ mediclaim. 116
10.11 better to take cash less car insurance policy
than ordinary car insurance policy. 117

Chapter 11 Policy Related General Matters

11. General knowledge about insurance claim
related matters 117
11.1. Proposal Form 117
11.2. Letter of intension to insure 117
11.3. Insurance policy taken for formality rendering
it futile. 118
11.4. Condition of reasonable care clause applicable
to almost all policies 118
11.5. Coverage of items in the insurance policy 119
11.6. Change of business or items 120
11.7. Changes not made in insurance policy 120
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11.8. Contract of insurance policy 120
11.9. Address of insured 120
11.10. Change of ownership of insured 122
11.11. Period of policy. 123
11.12. Policy only signed by insurance company 124
11.13. Terms and conditions not given by insurance company 125
11.14. Bank stock statement 126
11.15. Sum insured 126
11.16. Dishonour of insurance premium cheque 127
11.17. First loss basis coverage 128
11.18. Short period excess stock 128
11.19 last minute insurance 129
11.20 close proximity claim 130
11.21 Inspection by insurance companies 130
11.22 loss minimisation 130
11.23. Self risk coverage and exclusions 131
11.24. Burglary / fire once in a life time experience 134
11.25. Insurance advisor of industries 135
11.26. Development officers v/s claim department 135
11.27. New regime of brokers 136
11.28. Insurance policy taken by banks on behalf of 137
borrowers
11.29. Bank assurance 139
11.30. Further benefits of bank assurance 140
11.31. Insurance premium pool 140
11.32. Insurable interest for own stock and held in trust 141
11.33. Stock given in trust to others 142
11.34. Temporary godown 142
11.35. Excess clause 142
11.36. Substandard 143
11.37. Automatic insurance with banks for stolen
cheques/ theft from bank lockers 144
11.38. Preliminary report v/s main surveyor appointment 146
11.39. Role of investigator in insurance claims 147
11.40. Avoid smaller claims 149
11.41. Follow one company for insurance 150
11.42. Renewal of insurance with same company. 151
11.43. Claim settlement process 152
11.44. Ad hoc payment against a claim 153
11.45. Consent letter 153
11.46. Letter to police to hand over future
recovery to bank. 154
11.47 Whether to contest full and final claim payment 155
11.48. Business of insurance company re-insurance 156
11.49. Cancellation of insurance policy 156
11.50. Not having R.O.in cities. 156

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Chapter 12 claim settling authority

12. Hierarchy of insurance companies 157
12.1. Financial authority for misc. claim settlement 159
12.2. Financial authority for fire claim settlement 160

Chapter 13 Grievances Authorities

13. What if claim not settled 161
13.1. Consumer courts 161
13.2. Insurance ombudsman 163
13.3. Claim settlement week and grievance
department at Regional Office /Head Office 164
13.4. Arbitration 165
13.5. Right to information act ( R.T.I.) 165
13.6. Insurance regulatory and development authority 166
13.7. Rights of policy holders to obtain a copy of survey
report under IRDA rules 167
13.8. Ministry of public grievances 167
13.9. Ministry of finance 167
13.10. Civil courts 167

Chapter 14
Preface as conclusion 168

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1. Conclusion As Preface

I now know after reading this book how to obtain proper insurance policy and provide
relevant papers in support of the claim, should a claim arise. I realise that insurance
company is my best friend in my worst time of crisis like fire / burglary / flood / earth
quake / sickness / accident / or even after death, is friend of my family. Now the
insurance company knows my new address even before I shifted to the new premises.
How can you miss a friend in need and deed. Information about my new address to other
friends and relatives can wait but not to insurance company. I now buy a new piece of
jewellery or buy a new factory or office, but first information is given to insurance
company to obtain endorsement on the existing insurance policy. The new mobile phone
or lap top or car comes home along with a new insurance policy only. I now know my
best friend in worst time is insurance company who charges so less for covering such a
huge risk.

No one knows your business better than you. You can become your own insurance
surveyor. Make your own insurance claim file. Being a C.A. Or Doctor or Engineer or
M.B.A. You can make your claim file better than the surveyor. The mystery and veil of
secrecy around claim assessment by surveyor and insurance companies is hereby lifted
and made transparent for the benefit of policy holders and claimants.

This book is all about practical aspect of general insurance claims like that of Fire/ Misc/
Motor / Medical etc. and not about Life Insurance. There are many states in India where
people are business-minded and are financially sound. They also have high education. In
Gujarat people have money but they do not understand insurance and far less when it
comes to insurance matters. There were not many claimants of earth quake insurance
claims after the earth quake in Ahmedabad. In Kerala or Mizoram or West Bengal where
people are highly educated but they also have little knowledge of insurance related
matters. Then there are I.T. related skilful people but they do not have time for proper
insurance policy and much less when it comes to claims.

This book is dedicated to enrich knowledge of insurance related practical matters for all
our countrymen irrespective of where they are living, whether in villages or towns or
cities. The book is also for the unborn child who may become a c.a. Or engineer or
business man and wants to take an insurance policy or he may have to take an insurance
claim.

I have spent major portion of my professional life as insurance surveyor and would love
to give back to the society what I have learnt from them in terms of insurance knowledge.
Let me make an attempt to enrich the future generation by providing them practical side
of general insurance knowledge.

Feelings of return back to the insurance industry and the society for what they have done
to me has made me to write this book. In 1985 when I took insurance surveyor license, I
did not have any knowledge at all about insurance claims related matters. In last more
than 20 years I have learnt a lot but I feel the society at large is still at the same place
where I was in 1985 in terms of insurance related matters knowledge. So I thought why
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not share the fruits of my knowledge with the society and thus repay to some extent what
I have received in terms of insurance knowledge. I was inspired by many starting from
Bill Clinton to Donald J. Trump or Robert T. Kiyosaki or Alan Greenspan who wrote
books to enrich the society with their experience in their respective field. By reading their
books many became much bigger than them and thus the torch was carried from
generation to generation. Now their books are translated in various Indian languages to
find place in A.H. Wheelers book stand on small railway stations as well. I am making a
small contribution by way of this book to the insurance world knowing very well that my
knowledge is very limited comparing to the vast knowledge store House With The Top
Executives Serving With The Insurance companies as well as some of the past and
present surveyors in the insurance industry handling claims of hundreds of crores. I wish
some day Indians are insurance minded and there is plenty of reading material available.
There are so many books in the market about theory side of insurance but the market
lacks practical insurance books. The insurance knowledge is locked in the four walls of
insurance companies and surveyors and that is exactly the reason insurance has not
reached to one and all.

India is a vast country and everyone may not have access to decisions of
SC/HC/Consumer Courts related to insurance matters. They may be knowing very little
english and may be knowing much less about insurance. But there lies all the more need
of insurance due to burglary or fire or flood problems in their small town or village.
Hence practical knowledge of insurance is very important to them.

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Chapter 1

Introduction

By way of writing this book, effort is being made so that proper policy is obtained from
insurance companies as per requirement of policy holder who if guided, can save
enormous amount of time/money and avoid court cases.

Purpose of insurance policy is to transfer some amount of risk to the insurance company
by taking insurance policy after payment of insurance premium being cost of risk
transfer.

The potential policy holder can save his time if he can study the policy terms and
conditions in advance even before it is issued. The prime purpose of taking insurance
policy is to see whether the policy can give him the necessary coverage sought for. Effort
should always be made to take all risk policy as far as possible. The policy document
would clearly state what perils/ risks are covered.

Secondly focus can be made on the exceptions mentioned in the policy terms and
conditions. This is of utmost importance should a claim arise. Without terms and
conditions, its like a tenant without rent agreement or a partnership made without a
partnership deed, a company formed without memorandum of article of association. The
insurance policy covers the risk subject to the terms and conditions. The terms and
conditions are normally very exhaustive and written in very small letters but they do
govern the policy coverage.

It is very important to find mention of exclusions to the policy under which the risk is not
covered inspite of issuing the policy and premium having been received by the insurance
company. The exclusions are many and should be clearly under stood and kept in mind.
E.g burglary from unattended vehicle is not covered in the policy. Burglary from house
not occupied by any one for over 7 days is not covered in the policy. Theft without
forcible entry or exit is not covered in the burglary policy. In burglary policy loss due to
infidelity of employee is not covered. In case of personal accident policy death due to
dangerous games like paragliding/bungee jumping/parachute jumping are not covered.

Once you know what is covered and what is not covered then you know almost whole of
the policy. Your duties are explained in the book in case of a claim. What are your rights
should your claim be rejected by the insurance company also finds place in the book.

Even after policy is issued, policy holder can study it and can get it amended by obtaining
proper endorsement from the policy issuing office for required changes. Thus future
disagreement or disputes can be avoided.

In between the policy period, if any circumstances of the insured changes, then he can get
the policy amended to suit his changed circumstances e.g., change in his business,
address, value of stock is increased beyond sum insured, temporary change in place
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where he keeps stock. These can be amended in the policy and suitable endorsement can
be called for, from the policy issuing office.

Once a policy has been issued it will not necessarily serve the purpose through out the
policy period. Time wise changes can be sought in the policy to suit changed
circumstances.

In case fire, engineering, marine, factory installation claims there are lesser problems
involving corporations/companies who are in the organised sector. They obtain proper
policy as per their requirement and are organised to meet papers formalities of insurance
companies. The claims arise in the normal course of business and routine papers are
provided to substantiate a claim. The large policy holders like industries, businessmen
have scores of advisors/consultants/employees to advice them and to look after their
interest. The large policy holders may even have insurance department in their own
offices to supervise their insurance policies throughout the year. The insurance
companies also take special care of these big industries/businesses that pays them huge
insurance premium.

However the individual and retail policy holders in the unorganised sector are scattered
over the country and are even spread in small towns/districts where necessary guidance
may not come forth easily by way of advisors. But the rules of insurance are same for all.
The policy holder may be illiterate even then he may take insurance policy. Even in big
cities the common man is unaware of the policy intricacies and its terms and conditions.
They also fail to understand the policy terms and conditions in spite of the fact, the policy
holder may be ca/ engineer/ businessmen/ lawyer/ government employee etc.

It is target of this book to educate these masses, so that they can understand the policy, its
terms and conditions, the rules governing the policy, grievances scope, their duties during
policy period, and their rights on the happening of a loss.

In this way the insurance companies would also be gainer, since an educated policy
holder would contribute more of premium and thus total premium received by insurance
companies would also increase. The retail customer being an average person will also
seek coverage of risk by paying small amount of premium.

The common man would be gainer since he can understand the policy issued to him and
its intricacies by reading this book. He can plan his risk coverage in a better way. Even
sitting in a small city or town or even sitting in a remote corner of the country he can
under stand his insurance policy, thus better coverage of his risk. He need not visit
insurance offices to find out his rights/ duties/ scope of coverage. In India many people
are educated, even un-educated businessmen can ask their staff or educated family
members to read relevant portion of the book and obtain suitable insurance policy.


As of now insurance policy holders are spread in big cities, big towns and policies are
taken by industries, banks, companies, etc. The other segment of people not falling under
this group are afraid of taking insurance policies and if at all they take insurance policy,
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they fail to look after their own interest during policy period, neither they are in a
position to protect their interest in case of a claim.

The head office of the insurance companies are located in metro cities like Kolkata,
Delhi, Mumbai, Pune and Chennai. The regional offices are in state capitals or in big
cities only the smaller towns have only divisional offices or branch offices. So the
expertise of insurance is limited to big cities only the people in small towns are more
prone to Theft/ Burglary/ Flood/Fire etc. but they rarely take insurance coverage in the
absence of insurance related knowledge.

The government offices like insurance ombudsman/ consumer courts are mostly in big
towns again the smaller town people do not have easy access to these offices the common
educated man is very quick to understand the policy if an effort is made let them plan for
themselves their hard earned money can be safe guarded by paying small amount as
insurance premium.


endless amount of time/money is spend after a claim is processed and finally rejected by
insurance companies in defending their stand that the claim is not covered in the policy.
The energy of the policy holder is also wasted in making efforts to ensure claim payment
along with interest. It has to be under stood that in our country taking claims through the
court or other legal routes is quite time consuming and spread over years of visit to
lawyers and courts. The purpose of this book is to make an effort to avoid these wastages.


The insurance companies also want to settle a genuine claim falling under four corners of
the policy wordings. Rejection of a claim is not their purpose but a claim which is outside
the ambit of the policy cannot be entertained since they are also subject to C&AG
Audit/Statutory Audit/Vigilance etc.

There are many grievances redressal forums available to the policy holders who have to
clearly understand their implications in terms of involvement of time and money,
following and understanding terms and conditions of policy can help the policy holders to
a large extent.

A new surveyor and Loss Assessor/C.A./Engineer can refer the book for practical steps to
conduct survey and assessment of loss keeping in view the policy terms and conditions
and proposal form.

Let a new student of commerce of class XI or XII or Graduation or P.G. Course refer the
book as a base reference for easy understanding of insurance matters and make use of the
knowledge for the benefit Society/Business/Industry.

I went all over India for survey and assessment of claims but I found one thing in
common that people wanted to insure and pay premiums but they had no one to guide
them to a properly drafted insurance policy to cover their risk. People suffered huge
losses and finally resulting rejection of their claims due to bad policy taken by them.
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People at large are not aware of intricacies of insurance related matters even by
C.A./M.B.A./Engineers.

This book is summary of my more than 20 years of experience and association with
insurance companies as a surveyor and loss assessor and me being a Chartered
Accountant. I found complete imbalance of information to people who takes insurance
policies and those who issues insurance policies.
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Chapter 2

2. Papers required in case of burglary claim related to stock.


The first thing the surveyor would do is stock taking of saved items lying with the insured
after the burglary. List of saved items must be made.

The surveyor may take copies of relevant documents and initial on the following:-

1. Cash book (initial on last page of cash in hand)
2. Sale bills (initial on last few sale bills)
3. Purchase bills initial on relevant purchase bills.
4. Physical or computer generated stock register (initial on pages where stock has
been stolen).


Re: policy

Copy of insurance policy.

Copy of insurance policy is required so that one can check sum insured under the policy,
what items are covered under the policy, what is the policy period, whether the risk is
covered under the policy or not, whether address where loss took place is covered in the
policy or not etc. Policy number is generated in system after the insurance policy is
issued. The policy number contains branch code, nature of insurance, year of insurance
and policy number.

Intimation letter to insurance company.

Letter given to insurance company about the loss covers some of the basic facts about the
loss as revealed by the insured. What is the approximate amount of loss? How the loss
took place etc. Immediately on sending intimation letter about a claim, claim number is
generated by the insurance company in their system. Reference to this claim number is
made till the claim is settled. One can ask for claim number from the insurance company
after lodging insurance claim. Intimation letter should also contain policy number under
which claim has been lodged.

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1. Claim form with details of items lost.

Claim form is issued by the insurance company. Once the claim on the basis of intimation
letter is registered, claim form is needed for details of loss, quantity, what is amount of
loss etc. Claim form duly filled up may be given to the insurance company or to the
surveyor during survey.

2. Proposal form.

Proposal form is required to see the intention of the insured for coverage of items, what
are the items stated in the proposal form. Insurance policy is issued on the basis of
proposal form.


Re: Police

1. Copy of F.I.R. duly translated in english if not in english. F.I.R. is taken in order to
check whether the loss is registered with the police or not. Under which section of
Indian Penal Code F.I.R. is registered by the police. Information given in the F.I.R. Is
taken as authenticate information and the items given in the F.I.R. is claimed to be the
final list of stolen or damaged items. During assessment of loss, list of items stolen
given in the F.I.R. is considered for assessment of loss.


2. Details of loss / subsequent letters given to police

Detail of loss given by the insured to the police by way of subsequent letters may be
collected.

3. Charge sheet / Arrest / Superdari for recovery/final police report u/s 173 of I.P.C.
duly attested.

Final police report is taken to check whether any arrest or recovery is made by the police
or not. If arrest or recovery is not made, then police closes the file and issues untrace
report to the applicant. If any arrest or recovery is made related to the case then police
submits challan/charge sheet under section 173 of I.P.C.

4. Details of recovery and arrest made by the police.

Recovered stolen items are deducted from the claimed loss.
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Re: Items Lost

1. Stock Register.

Stock register is taken to check whether the items lost appeared in it and in what quantity.

Small traders below Rs. 60.00 lakhs sales are not required to get their books of accounts
audited if they show minimum amount of profit as per income tax act. So the insurance
companies cannot invoke presentation of audited of books of accounts condition. In such
cases books of accounts, purchase bills / sales bills / bank statements / vat return may be
procured and analysed for assessment of claim.

Volume of the stolen stock verses saved stock may be considered.

Provisional trading account as on the date of loss (before loss) duly attested by c.a. May
be obtained to find out stock at the time of loss to arrive at under insurance if any.


2. Details of stolen stock / item / rate / quantity / bills / payment / weight / packing /
where kept.

Detail of items lost is taken from the insured e.g. When purchased, how much payment
was made, from whom purchased, rate of the stolen items, total value of the stolen items
etc.

3. Detailed statement of owner and concerned staff as to how the loss took place.
It helps the surveyor to know about the exact detail as to how the loss took place. What
happened when insured came in the morning. How he came to know about the loss, what
steps he had taken after knowing that the loss had taken place. When did he inform the
police and the insurance company about the loss?
.

4. Purchase bills of lost items.

Purchase bills of stolen items are taken in order to check the genuinity of the claimed
loss. When the stolen items were purchased/how old was the stock etc.?

Re: Bank

1. Bank statement of the last few months transactions

Whether most of the payments of purchases are made by cheque or not. Cash purchases
are not very reliable and can be easily manipulated to exaggerate the claim. Some times
heavy purchases are found made just before the loss and payments for such purchases are
also not made. Such purchases needs deep scrutiny to find out whether they were
intended to manipulate the claim or were genuinely purchases duly supported by challan,
transport receipt, if purchased in the normal course of business to meet sales orders
20 | P a g e



2. Is there any credit limit with the bank? If yes, copy of stock statement submitted to
bank for last few months duly verified by bank.

If insured had taken loan against stock, then he has to give monthly stock statement to the
bank. It also helps the surveyor to check the stock position of the insured as per stock
statement. Is there any difference between book stock and stock as per bank stock
statement, if yes, the same may be investigated. Normally year end stock as per balance
sheet and stock statement is same and tallied to each other to avoid income tax problem
and scrutiny by banks.

Problem arises during the year when at the time burglary, stock as per stock register does
not tally to stock as per monthly stock statement given to bank. Such cases need to be
investigated in detail. Problem may get further complicated if it is a case of under
insurance. As such it is advised that in case of bank limit against stock, stock statement
should be submitted correctly as per stock records.

3. Copy of sanction letter of limit.

Sanction limit shows how much limit is sanctioned to insured against stock by bank.


Re: Saved Stock

1. Detail of saved stock in shop
Item/ Qty. / Wt. / Rate/ Value.

First thing any surveyor or preliminary surveyor would do is stock taking of saved stock
and then tally with stock records and purchase bills.


Re: Books of Accounts

1. Up to date books of accounts for verification, purchase ledger, sale ledger &
cash book, sale bills, receipt memo and issue memo.
2. Income tax returns, balance sheet and trading account of last 3 years.
3. Copies of transfer memo of stock sent to others for processing and thus saved.
4. Copy of sales tax return and vat return of last three years.

Most of the insurance policies issued to Company / Firms / Commercial organisations
have a condition that they will maintain proper books of accounts as required by law.
This will help substantiate the insurance claim so far as its ownership / quantity / rate /
value is concerned. Books of accounts play a vital role in assessment of loss.

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5. Copy of purchase bill of stolen items, volumetric analysis, year of purchase,
proof of payment made, ledger of supplier duly verified by them in support of purchase
bills of stolen stock.

Purchase bill is of prime importance in support of goods having been stolen. Various
purchase bills may be verified from the suppliers in case loss cannot be attributed to
specific bill. Average rate may be allowed for the stolen quantity.

The surveyor may also consider sale less gross profit percentage to arrive at cost of sales
and apply this to arrive at cost of stolen items.

Average cost of purchase in the last one year may be considered if it is found that only
recent stock of last one year has been stolen.

Proof of payment has to be established to prove ownership and insurable interest. Mere
challan is not enough.

Production of purchase bills/ books of account in support of ownership of stock

One has to provide relevant documents including purchase bills to the satisfaction of the
insurance surveyor deputed by insurance company. Claim not substantiated by the
insured may be rejected by the insurance company. If the purchase bill is very old and
cannot be produced or verified, in such cases the insured should convince the insurance
company about presence of stock before loss. If stock is stolen and the insured does not
have purchase bill, in that case he has to procure duplicate purchase bill from the supplier
or produce challan in support of stock. Proof of transportation of stock to the insured may
be provided. Past dealings in the books of accounts may be shown for verification by
insurance company.

6. Stock register showing stock presence before loss.
Quantity of items has to be established through stock register. If stock register is not
maintained then suitable proof has to be given for quantity bought / quantity sold.

Trading account showing stock at risk at the time of loss certified by c.a. As on the date
of loss before burglary may be given as follows:-

Provisional trading account (before loss)

Amounts
(Rs. P.)
Amounts
(Rs. P.)
Opening stock Sales
Purchases Closing stock
Direct expenses
Gross profit



22 | P a g e

The C.A. may have to be convinced to certify the provisional trading account before the
loss and need not be audited but compiled on the basis of books of accounts.
Provisional trading account as on the date of loss shows exact amount of stock that was
with the insured at the time of loss to arrive at stock at risk. This will help assess
adequacy of insurance to apply under insurance, if any.

7. Volumetric analysis of the stock.

Stolen stock could have easily been accommodated in the room/godown or not? How
stock was probably carried by thieves / time taken to load / number of persons
required to load / vehicle required to carry.
Volumetric analysis helps in determining the genuinity of claimed stock in quantity.


Re: Misc.

1. Profile of the company/ nature of business/ sister concern/directors. Is the factory
on rent or self owned?

Profile of the company gives a brief idea about the company and its working. It helps in
knowing business of the insured.

2. Copy of newspaper cuttings about the loss duly translated in english.

Newspaper cutting gives some idea about the loss/damage / incidence as well as arrest or
recovery.

3. Is there any security arrangement in the factory after the business hours? If yes
copy of security bill may be taken.

4. Map of the site of loss.

Map of the site of loss helps in getting full knowledge about the premises as well as entry
and exit route of the burglars.

5. Proof of forcible entry or exit.

One must check for proof of forcible entry or exit. Whether kundi was broken or lock
was cut or door was broken or window was broken. Could the stolen item have been
easily taken through the gap made? This is important in case of burglary policy to collect
proof of force applied to commit the burglary, other wise the loss is not covered in the
policy.





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2.1. Exclusions to burglary policy
The insured premises should not be left uninhabited for more than 7 days, e.g. M/s
Kapoor industries left his Meerut factory during lock out for a period of one month.
During this period burglary took place at his factory. The insurance claim was finally
rejected on the ground of leaving his factory uninhabited for more than 7 days.

Policy does not cover precious articles like gold, jewellery, cash unless specifically
covered in the policy. Theft or loss by insureds staff or any other person like guard,
watch man, sweeper who is law fully in the premises is not covered in burglary policy if
infidelity of staff is excluded. Any major alteration that may increase chances of loss,
done in the insured premises may also result into rejection of claim.

2.2. Money not covered in case of burglary
In case of burglary policy, money and valuables are not covered in the policy unless
specifically declared to the insurance company.

2.3. Burglary from open stock yard
Normally loss from open stock yard is not covered under the burglary policy. Stock has
to be kept under lock and key covered by walls and roof. Mere keeping stock in the
factory in the yard secured by boundary wall is not enough. At the time of taking
insurance policy one should make it very clear whether the plant is in the open or secured
by plant room duly locked. If the trade requires keeping the stock in the open because of
their nature of business or if the stock is very heavy or impractical to store in closed
godown, in that case suitable policy should be taken covering such stock and risk in open
yard.

2.4. Loss has to be discovered within 14 days of incident
Burglary from godown or factory has to be discovered within 14 days of loss and
intimated to the insurance company as per claim procedure. Loss may take place by
breaking grill from one corner of godown or factory not visited by any one. The broken
grill might have been covered by stock and as such no one noticed the broken grill. The
thieves might have committed burglary at regular intervals without being noticed by any
one. Forcible entry is very clear in such cases but the insurance company may not
entertain the claim taking the plea that the loss took place before commencement of the
policy or it may be case of theft of stock by staff and not covered in the policy. The loss
may be due to pilferage and discovered during stock taking. In every factory some such
losses are reported every year during stock taking and these losses are not covered under
the policy.

2.5. Value of insurance for computers on depreciated value or market value
In case computers the situation is very so far as its value for insurance is concerned. In
Jan 2008 say 160 GB hard disk, Pentium double processor, Ram 1 GB, 17 inch monitor
Tft are available for Rs. 30,000.00 and you insure correctly now. Next year the value of
similar configuration computer is available for Rs. 15,000.00 and as per income tax you
have proved 60 % depreciation in your fixed assets schedule showing the value as Rs.
12,000.00. As on Jan 2009 new computer for Rs. 30,000.00 far different in configuration
24 | P a g e

than what you had purchased, it has say 640 GB hard disk, Ram is 4 GB and processor is
very fast than what you had purchased.

Thus decide what value you want to insure your computer next year. At 12,000.00 being
depreciated value you can insure your computer. You can insure the same at Rs.
15,000.00 after obtaining valuation report. You cannot insure it at Rs. 30,000.00 since
you do have these configurations in your computer. Even if you delete the up gradation
from the new computer on account of the new hard disk, ram or processor, you will arrive
at the same Rs. 20,000.00. In the third year, value in your books is just Rs. 4,800.00 after
60% depreciation on Rs. 12,000.00 and in the market the same computer is available for
Rs. 7,000.00 while new computer has far better configuration costing Rs. 30,000.00.
Should there be loss you cannot demand from the insurance company Rs. 30,000.00
inspite of best of your maintenance. Same is true for other electronic items like T.V. or
printer.

2.6. Theft without forcible entry or exit is not covered in the policy

It has been decided by the supreme court in the case UIIC Vs M/s Harichand Rai
Chandan Lal ( SC dated 24-9-2004 C.A no. 8277 of 2004) that if any theft is committed,
it should necessarily precede with violence i.e. entry into the premises for committed
theft should involve force or violence or threat to insured or his employees or to the
member of his family. Therefore the element of force and violence is a condition
precedent for burglary and house breaking. In the absence of violence or force the insured
cannot claim indemnification against the insurance company.

2.7. Roof of several building connected to each other

In cities and crowded places, the roofs of several buildings are connected to each other
from the top. One climbs the roof of any of the buildings and reaches the roof of the
building in which he wants to commit burglary. The top floor may have collapsible gate
or door which can easily be broken. Thus the thief enters the building from top to reach
the ground floor and exit in the same way after committing burglary. Even if there ware
security guards outside the building, they cannot discover the theft till the showroom is
opened in the morning. The main showroom gate on the ground floor is not affected at
all.

2.8. Burglary season

Normally it is seen that lot of burglary takes place around 26
th
January, 15
th
august,
Diwali, Dushera, 31 December, etc. During this period the local police are busy through
out the night and day of 25
th
January to 26
th
January. 26
th
January night is the night of
burglary since most of the police are tired and taking rest after 36 hours of duty. The
same applies on other days including 15
th
august, Diwali and Dushera. Burglary takes
place in working days with gap of one gazetted holiday or Sunday or weekly off for the
market or holiday after Sunday, when burglars get 36 hours or more to plan and commit
burglary e.g. Shop last opened on 12
th
April while 13
th
is Sunday and 14th is holiday for
Ambedkar Jayanti. One should be over cautious on these days against burglary.
25 | P a g e

2.9. Grill cut to enter in House/Factory

It has been seen that entry in the office/house/factory is made from the window having
grill. The iron grill is fixed with the help of screws which are cut to make way for entry in
the premises.

As a matter of safety screws in the grill should always wielded so that one cannot break
the window grill easily.

2.10. Security of empty office/showroom/factories at night

Dogs should be left for security of empty office/ showroom/ factories at night. The dogs
are better mode of security at night. They get up even at the slightest sound or smell.

2.11. Proper coverage of stock

In case of insurance of stock in a factory, one should not simply mention that stock of say
made ups and garments are sought to be covered in the policy. In that case if fabric is
stolen from the factory, in that case fabric being neither made up nor garments will not
cover in the policy. The coverage should be wide enough to cover raw materials, work in
process, finished goods and all other goods related to insureds business. One should not
restrict himself only to stock of finished goods or made ups or garments. The insured may
decide to deal in leather goods or handicrafts which are easily covered if the mention in
insurance policy that coverage is for all other goods related to insureds business.
Mention of other goods may also cover packing items.

2.12. Coverage of stock with Transporters or C & F Agents

Lot of companies have Transporters or C & F agents to store their stock. From the office
of the insured challan is made for issue of stock from the godown of transporters or c & f
agents. In such cases though policy is taken by the company who owns the stock but
coverage should be taken for all godowns of transporters or C & F agents where stock of
insured is kept. Either address of the transporters or C & F agents should be informed to
the insurance company or coverage should be taken of all godowns of the transporters or
c & f agents as per company records.
Many a times it is possible that the transporters or c & f agents may take a new godown
or they decide to keep excess stock at some other premises. In such a case having taken
insurance policy covering all godowns of insured without exact address would benefit the
insurance policy holder should there be loss.


26 | P a g e


A. About police

Format of F.I.R.

First information report

U/s 154 of CR. P.C.

Police station area

Time of loss U/s of I.P.C.

Intimation of loss

Date

Complaint by

Matter of loss


Signed by sub inspector


After a burglary has taken place, the local police is to be informed and first information
report (F.I.R.) Has to be lodged with the concerned police station. F.I.R. Is issued u/s 154
of cr.p.c. Detail of stolen stock and modus operandi of the burglary has to be informed to
the police. In case of recovery of stock from the criminals tally has to be made with the
details of stolen stock. The local police may write in their own hand writing oral
statement of the complainant in the F.I.R. In the alternative the local police may take
letter from the insured and copy language of the letter on the F.I.R. At the end of the
F.I.R. Sheet reference may be given about the investigation officer who is deputed to
look after the case or about visit of the I.O. At the site of crime or incident. Brief of the
F.I.R. Is mentioned in the daily diary register. One must ensure that the local police write
in the F.I.R. That force was applied e.g. braking of lock or door in committing the
burglary.


F.I.R. Is normally lodged under following sections of I.P.C.:

Section 379 F.I.R is lodged for day time theft.
Section 380 F.I.R is lodged for night time theft.
Section 391 F.I.R is lodged for dacoity/robbery by five or more
persons.
Section 395 F.I.R. Is lodged for dacoity/robbery.
Section 397 F.I.R is lodged for robbery or dacoity with
27 | P a g e

Attempt to cause death
Section 406 for loss due to infidelity of staff.
Section 457 is applied for forcible entry.



Several crimes at one place

In case of series of offences in one area, at about one time, committed by one person or
gang, in such cases one combined F.I.R. May be registered by police. It is not necessary
to register separate F.I.R. The name of all the victims may be mentioned in the F.I.R. Or
statement may be taken u/s 161 of cr. P.c. And add them in the F.I.R. Stamped copy of
F.I.R. Along with copy statement u/s 161 may be enough as proof of loss having taken
place. .

Section 379:

Punishment for theft- whoever commits theft shall be punished with imprisonment of
either description for a term which may extend to three years, or with fine, or with both.

Section 380: theft in a dwelling house, etc. Whoever commits theft in any building tent
or vessel, which building, tent or vessel is used as a human dwelling, or used for the
custody of property, shall be punished with imprisonment of either description for a term
which may extend to seven years, and shall also be liable to fine.

Section 391: dacoity when five or more persons conjointly commit or attempt to
commit a robbery, or where the whole number of persons conjointly committing or
attempting to commit a robbery, and persons present and aiding such commission or
attempt, amount to five or more, every person so committing, attempting or aiding, is
said to commit dacoity.

Section 395: punishment for dacoity whoever commits dacoity shall be punished with
(imprisonment for life), or with rigorous imprisonment for a term which may extend to
ten years, and shall also be liable to fine.

Section 397: robbery or dacoity, with attempt to cause death or grievous hurt if, at the
time of committing robbery or dacoity, the offender used any deadly weapon, or causes
grievous hurt to any person, or attempts to cause death or grievous hurt to any person, the
imprisonment with which such offender shall be punished shall not be less than seven
years.

Section 406 : punishment for criminal breach of trust whoever commits criminal breach
of trust shall be punished with imprisonment of either description for a term which may
extend to three years, or with fine, or with both.

Section 457: lurking house trespass or house breaking by night order to commit offence
punishable with imprisonment whoever commits lurking house trespass by night, in
28 | P a g e

order to the committing of any offence punishable with imprisonment of either
description for a term which may extend to five years, and shall also be liable to fine; and
if the offence intended to be committed is theft, the term of the imprison may be extended
to fourteen years.

Case no. I - A Case Of Theft Without Forcible Entry / Exit

Only section 379 or 380 of I.P.C. Is applied by police without invoking section 457, then
it is said to be a case of theft without forcible entry or exit i.e. Someone has say operated
key and stolen the stock or theft of stock from open yard or door was open and theft took
place or jumped wall and theft took place without breaking any lock. If there is no
forcible entry i.e. No locks broken or no doors broken then it is not a case of forcible
entry. The insurance company does not cover such cases of loss due to theft without
forcible entry or exit in case of burglary policy. How ever such losses without application
of force being theft losses are covered in all risk policy.

Case no. II - Loss Due To Infidelity Of Staff/Employee.

Burglary by forcible entry by staff is a case of loss by infidelity. The staff has legal right
to be inside the insured premises but loss due to his involvement is not covered by the
insurance company under burglary insurance policy. A separate policy for infidelity of
staff has to be taken by the policy holder to cover such eventuality.

Case no. III - Key Operation.

Loss due to theft by operation of key is not covered in the policy. In such cases normally
there is no evidence of use of force to commit the theft. The door or lock has not been
broken to commit the theft. From the circumstances of the case it is clear that the lock has
been opened by using the key. The burden of proof is on the policy holder as to how the
loss took place.

If the key has been procured by using force or threat to life then such a case of loss is
covered in the burglary policy. The key may have been procured by using a gun or knife
or threat to kill. In such cases breaking of lock or door is not necessary.

Case no. Iv- Burglary by Using Force

Only burglary by breaking lock or door or window then it is a case of burglary by using
force. Such cases are covered in the burglary policy.






2.13. Theft v/s burglary as per Supreme Court.

29 | P a g e

Under the burglary policy the insurance companies do not cover a case of theft without
using force. In the I.P.C. There is no difference between theft and burglary but the
insurance companies do make a difference whether loss has taken place by using force or
not. In case of loss having taken place without using force then such a case of loss is not
covered in the burglary policy. Even the Supreme Court has failed to understand why
insurance companies have tried to define burglary with force and without force whereas
no such definitions exist in I.P.C. But insurance contract is a contract which if followed
does mean that loss without use of force is not covered in the burglary policy.

There is another variant case where police does not invoke forcible entry section 457 of
I.P.C. In F.I.R. Or in final report but circumstances of the case clearly shows that it is a
case of theft using force e.g. Locks found broken or door found broken or window grills
found cut or almirah found broken. The circumstantial evidences may be enough to prove
use of force. In such cases even if section 457 of I.P.C. has not been invoked by police
even then the insurance company may settle the claim under burglary policy.


2.14. Only letter to Police is not F.I.R.

Normally letter is given to the local police and the letter duly acknowledged by the police
is considered to be F.I.R. In local parlance by general public. The general public does not
have any idea about F.I.R. Since they visit a police station only once in a while or
lifetime to have unique police experience. The local police tries to keep crime graph low
by not lodging proper F.I.R. It may be noted that F.I.R. Is a legal document and is
acceptable in the eyes of law in court, insurance company etc. The crime as mentioned in
the F.I.R. Has to be reported to the higher ups in the police and then finally finds its way
to government records. One copy of F.I.R. Is sent by the police to the D.C.P. / Magistrate,
second copy to the records. Only a photocopy is given to the complainant by the sub-
inspector who has registered the F.I.R.

It is written outside every police station that lodging of F.I.R. And obtaining copy of the
same is right of every citizen. How ever, the local police in criminal cases like theft,
burglary, infidelity, financial claims involving banks, companies does make good efforts
to avoid lodging of F.I.R. Till they find no other way but to lodge proper F.I.R. U/s 154
of cr.p.c.

2.15. Call at no. 100 of P.C.R.

It is always suggested that in case of any loss due to theft, burglary etc. One should avoid
visiting the local police station immediately but they should ring no. 100 of police control
room so that immediate notice of crime is taken by police.

The 100 call is answered by the police head quarter and immediately noting is made in
the call register. The call is immediately referred to the Gypsy or Qualis PCR and also the
district control room through wireless set. The PCR notes down in the register and
immediately visits the site of loss. The PCR is the first to visit the site. They may also
advise the complainant not to disturb the site till arrival of local police. The PCR as well
30 | P a g e

as district control room then refers the matter to the concerned police station through
wireless. The local police notes the message of PCR and district control room in the
register and then visits the site of crime.

In this way police cannot white-wash a crime. On arrival of the police team at the site of
crime, necessary letter about the crime may be given to the police. In such cases through
call at no. 100, the local police does register the case properly and issue proper F.I.R.
After completion of initial formalities report about lodging of F.I.R. Is sent to police head
quarter.

In case of serious crime like robbery, review visit is made by senior police personnel like
S.H.O. Or A.C.P.

In case of cognisable offence F.I.R is registered.

In case of non cognisable offence entry is made in separate register of rojnamcha or daily
diary (D.D.) Register if investigation is not required.

Original F.I.R. Is retained in the records
First copy of F.I.R. Is sent to concerned magistrate
Second copy of F.I.R. Is sent to complainant
Third copy of F.I.R. Is sent to investigation officer
Fourth copy of F.I.R. Is sent to A.C.P. Or D.C.P./A.S.P. Or D.S.P.

Now a day more and more police stations are issuing computerised F.I.R. Copy.

2.16. Daily diary (DD) register/Roj Naamcha

The local police notes in brief about the crime in the daily diary register serially; an
investigation officer is earmarked for investigation, I.P.C. Section invoked is also
mentioned. This register is saved and kept in record. Courts can also call for DD register
for verification. This register has all details like I.P.C. Or cr.P.C. Invoked, summery of
the F.I.R., who was investigating officer, action taken, recovery or arrest details etc?

2.17 Police Hierarchy

Home guard

Constable

Head constable ( H.C.)
He is the lowest ranking officer to investigate a case.
He must be minimum 10 pass and
Now a days even highly qualified are joining this rank.
He has no star on his shouldeRs.

Assistant sub inspector ( A.S.I.)
31 | P a g e

He has a star on his shoulders
He investigates grave cases.

Sub inspector ( S.I.)
He has two stars on his shoulders
Serious cases including cheating are marked to him for
investigation.
He can be chowki in charge also.

Inspector / Station House Officer ( S.H.O.)
He has three stars on his shoulders
Serious crimes including murder are marked to him for
investigation.


Asst. Commissioner of police / asst. Superintendent of police
He may be in charge of 2-3 police stations.
He can supervise cases and can handle cyber crimes. .


Addl. ACP/ Addl ASP

Dy. Cp / Dy. Superintendent of Police
He can be district chief of police.

Addl. Dcp / addl. Superintendent of police

Jt. Dy. Cp / jt. Dy. Superintendent of police

Special commissioner of police / sp. Superintendent of police

Commissioner of police / superintendent of police


2.18. Investigating officer

Investigating officer is earmarked for investigation of the crime. He is responsible for
visiting the place of crime, conducting investigation, collecting necessary details of the
crime, and deal with the file / case for all purpose till finalisation. He presents the case to
the local magistrate and to the concerned court.





2.19. The S.H.O.

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The S.H.O. Of the police station or station house officer is the head of the police station.
He does not involve directly with the complainant except in major cases. He makes
necessarily planning related to delegation of work, making strategy to catch culprits,
stopping crime in his area, increasing patrol, communication with higher-ups like A.C.P./
A.S.P., D.C.P. / D.S.P., C.P./ S.P., Magistrate etc.

2.20. Crime team

Crime team is there in every district. Some have dog squad as well. In case of serious
crimes, help of crime team of the district is taken for photographer, fingerprints from the
scene of crime, dog squad is also called for. Involvement of these departments is made in
case of serious crimes and it is advised not to touch any thing till arrival of police or
crime team for taking finger prints.

2.21. Crime branch of the state

There are two DCP in the crime branch. One heads the traditional crime section and the
second DCP may head the serious crime section.

In case of traditional crime, the DCP may be responsible for crimes like Robbery,
Burglary, Dacoity, inter state crime, homicide, anti kidnapping etc. Each unit is headed
by one A.C.P./ A.S.P. Entire state may be his jurisdiction. He can directly register F.I.R.
Also. Cases may be referred by police stations also. Cases can also be taken up where no
action has been taken by local police.


In cases of serious economic offences, political cases, cheating cases above Rs. 1.oo
crore etc. Economic offence wing of crime branch of state may be involved. Some of the
departments of E.O.W. May be: -
1. Land and building,
2. Cyber crime
3. Fraud and cheating
4. Anti forgery
5. Intellectual property right
6. Criminal breach of trust like siphoning of funds or over invoicing etc.

Now a days separate police stations are made at these crime branches of state and one can
register F.I.R with them directly in place visiting local police station.

33 | P a g e

2.22. F.I.R is mandatory as per Insurance Company

It is mandatory in case of insurance claim to lodge proper F.I.R., otherwise insurance
company would take no time to reject the insurance claim. In such cases of loss without
proper F.I.R., the insurance company does not get subrogation rights in case of recovery
of stolen stock. As per law the local police are the only authority to take cognisance of
the crime having been taken place. In case as per local police no such crime has taken
place then the insurance company is also not in a position to take cognisance of the crime
and thus rejects the claim.

As such, mere letter to police detailing the loss is not enough unless proper F.I.R. U/s 154
of cr.p.c. Is registered by the local police. The police will apply sections of I.P.C. Under
which crime has been committed. If F.I.R. Is not registered by the local police inspite of
intimation to them, it may be presumed that local police is not convinced about the crime
and as such they have not registered F.I.R. In the absence of F.I.R insurance companies
do not accept such claims. It is a pre conditioned of insurance claim that F.I.R. has to be
registered by the local police.

If the insured is not satisfied with the action taken by the local police, he may approach
the magistrate or court to direct the police to lodge F.I.R. Order of the court is enough
proof for the insurance company to admit a claim, whether the local police does any thing
or not after court order unless the police has proved that no such crime took place at all.

2.23. What to do if F.I.R. Is not registered by local police

1. One can again call number 100 and inform them that it is a double call case. These
calls may be referred to vigilance department of police who can make sure that the local
police register F.I.R.

2. One can also meet A.C.P. Of the district if F.I.R. Is not registered.

3. One can also meet the magistrate of the district who can order the local police to lodge
F.I.R u/s section 156(3) of cr. P.c.

Every 2-3 months the district magistrate is updated about progress of F.I.R in all cases
involving the 2-3 police stations under him.

2.24. Hierarchy of Magistrate and Courts

Judiciary -- Magistrate
They have 2-3 police stations under him.

Metropolitan Magistrate (M.M.)

Addl chief Metropolitan Magistrate ( A.C.M.M.)

Addl. Session Judge ( A.S.J.)
34 | P a g e


Chief Metropolitan Magistrate
At district courts

Session Judge

High court at state level

Supreme court

2.25. Intimation of loss to police

Normally the person who first rings P.C.R. No. 100 does find mention of his name in the
F.I.R.

The loss may have taken place in say m/s x & company but F.I.R. Can be lodged by the
director, partner, owner or employee of the insured company saying that loss has taken
place in m/s x & company due to burglary on dated at time by breaking locks of the
shop / godown / factory door. As such it is not necessary that only the insured company
has to lodge F.I.R. Mention of name of insured or his address is enough to cover the loss
in the eyes of insurance company.

It should be ensured that correct address of the site of loss is mentioned in the F.I.R. And
the same should tally to the address mentioned in the insurance policy.

Letter to the police can be given detailing the incidence of loss, estimated amount
involved, brief detail of the loss in quantity / rate / value / time / date or even can be said
that they will inform the local police after checking records. In such cases it is very
important that later on detailed information must be given to the police about the loss.
Mostly people forget after lodging F.I.R and no one reads that in the middle of F.I.R. It is
written that detailed information would be given to the police later on. Not providing
detailed information to the police may affect the insurance claim.

All letters including intimation letter, detailed letter of loss must be duly acknowledge by
the police by putting a sign, date and rubber stamp.












35 | P a g e

2.26. Non Cognizable Offence Report (NCO)

In case of certain type of losses the local police does not register F.I.R. It is discretion of
the police whether to convert the complaint to F.I.R. Or into daily diary. It is not
necessary to register F.I.R. For all cases.

Jewellery/Purse/Cash/Mobile Phone/Foreign Currency has been lost or stolen in a
Cinema Hall/Marriage/Market/Bus/Car/ Temple/while travelling and the same could not
be traced. There is no doubt on any one.

Separate daily diary register is maintained by the police for such cases.

For such cases the local police can register non cognizable offence report and the same
can be sufficient for insurance claims. In such cases final report is not issued by local
police.

However after some time the local police can close the case by writing on the non
cognizable offence report itself that there is no arrest or recovery.

2.27. Loss due to Dacoity / Volumetric Exercise

Burglary involving 5 or more person is a case of dacoity u/s 391 of I.P.C. And the local
police may make all efforts to make sure that there is no mention of 5 or more persons in
F.I.R. Or in intimation letter to keep crime graph low. This may later on create trouble to
insured. He may have to prove how such a big burglary of stock could take place in such
a short time not involving say 10 persons. In case of volumetric / time / weight analysis
prove that the weight of the stolen stock was say 3 tonnes and only a Tata 407 truck could
have only transported it requiring about 10 persons. Each carrying say 20 k.g. At a time
in three minutes could make 20 trips in one hour or 20 x 20 = 400 k.g. And involving 6
persons could have carried 400 k.g. X 6 persons = 2400 k.g. Keeping in view 100 meters
distance from the place of stock to truck. 1.5 minutes to carry, 1.5 minutes to return thus
not more then 2.4 tonnes or approx. 3 tonnes could be carried in the given time / persons
involved / vehicle in a claim of loss of 3 tonnes. The volume of a Tata 407 truck is
approximate 1.5 feet height x 5 feet width x 9 feet length = 67.5 cubic feet. This volume
has to be enough to store the stolen stock.

2.28. Burglary and volumetric analysis

In the case of a burglary involving 50 cloth bales weighing about 40 k.g. Each cannot be
stolen by two thieves manually. In such a case involvement of a vehicle to carry the stock
is very important to justify the burglary. The security guard may state that he had seen
two thieves running with two bales and on being chased they left two cotton bales and ran
away. The owner may inform the police that 50 bales had been stolen and the police may
also register F.I.R. And issue final untraced report later on. But the claim may not be
justified on the ground that 50 bales weighing about 2000 k.g. Cannot be carried by two
persons and as such mere lodging of F.I.R. Cannot be a reason to admit the claim.

36 | P a g e

Thus mention of time period of burglary, number of persons involved, mode of
transportation possibility is very important. Else it can land the insured into difficult
corner. One must mention the actual information to the police so that truth can easily fall
into place related to the burglary.


2.29. Section 457 in final report

Even if initially section 457 of I.P.C. For forcible entry has not been applied but later on
police applies section 457 in final police report, then the loss may be said to be covered
under the burglary policy. The police during investigation may find that it was really case
of burglary by using force as such initially in the F.I.R. They may book the case u/s 380
of I.P.C. And may not initially apply section 457 but later on in final report they may
insert section 457 of I.P.C. On being satisfied that loss has taken place by using force
only. Even if police does not invoke section 457 of I.P.C. But mention breaking of
door/window etc. In the complain letter to police or similar mention in the F.I.R. May be
enough to cover the claim under burglary policy.


2.30. Regarding Final Report By Police.

Usual final police report of untraced is issued by police when there is no arrest or
recovery. Normally untraced report is issued after 90 days of F.I.R.

In case of union territory like Delhi where police commissionarate are in force as per law,
in these places police has judicial powers to issue final police report after 90 days of
F.I.R. Acceptance of final report by magistrate or court is not necessary.

Specimen of untraced report

F.I.R. No. .. Dated.. U/s . Lodged at police station . Is reported sent as
untraced in the absence of any arrest or recovery in spite of investigation. The case
would be reopened again if any fresh clue received.

Signed S.H.O / S.I.
Date

This untraced report is enough for the insurance company to settle the claim. Normally,
claims are not settled by the insurance company till final untraced report is received by
them. Though in the insurance policy there is nothing to suggest that final report is
necessary for settlement of a claim. It has only become customary to await final report.
But in other states final report duly singed is filed by police with the magistrate and
admitted by court is necessary. It may take more then 6-9 months to issue such final
report in other states. It contains full matter of F.I.R., section of I.P.C. Applied, steps
taken by police for investigation, final conclusion by police. The same is forwarded by
concerned police station to D.S.P. Office to the magistrate / court for acceptance of final
report. The court can ask the complainant if he is satisfied about the outcome of police
37 | P a g e

enquiry and then only orders closure of the case. The whole process can take substantial
amount of time of even more than a year.

The court accepted final report u/s 173 of cr. P.c. Is required by insurance company for
settlement of claim. An application, after paying required court fees, can be made to court
for providing copy of final report.

Simply police attested final report is not acceptable to insurance companies, since police
does not have judicial powers in other states to issue final report.


2.31. Challan / charge sheet by police

In cases where arrest has been made by police concerning the crime, local police submits
charge sheet / challan u/s 173 of cr. P.c. Against the criminals in the court of law. In such
cases final police report is not issued. The charge sheet / challan copy can be given to the
insurance company for settlement of claim. Though court case can go on for years for
insurance companies can settle the claim on the basis of charge sheet / challan without
awaiting final verdict of court.

The charge sheet contains as follows:-

First column
Complainant


Second column
Persons not sent for trial or proclaimed offender

Third column
Name and address of accused

(A) In custody, arrested to recover and can continue crime.
(B) On bail or recognised, not arrested, charges sheeted, trial accused.


Fourth column
Miscellaneous other facts of the case.


If the crime section invoked requires maximum possible punishment less than 3 years
as per I.P.C. Invoked, then its non cognisable offence and it is cognisable offence if
requires maximum punishment is more than 3 years. Charge sheet has to be filed
within 60 days of arrest if maximum possible punishment is more than 7 years.
Charge sheet has to be filed within 90 days of arrest if maximum possible punishment
is more than 10 years.

38 | P a g e

2.32. Vernacular translation of F.I.R.

Matter of F.I.R. / final report / challan / charge sheet in local language is required to be
translated in English. Moreover police language itself is antiquated and cannot be
understood in writing or even the wordings which are mix of English era/ king time / old
rulers time language. Oriental insurance H.O. Being in north cannot understand south /
west / eastern languages. United India H.O. cannot understand northern local dialects
mixed of Urdu / Hindi. If a claim has to be settle at H.O. level, then translation is very
necessary in English.


2.33. Recovery / Superdari

In case part of stolen property is recovered from the criminals, the same is kept in the
police custody / maalkhana for identification by the owner. Once the owner has identified
the stolen property, the custody may be handed over to the owner on the basis of
superdari by the court on application. Superdari means that owner has to safeguard it for
production in the court till the case is finalised and crime is established against the
criminal. The owner cannot sell it or pass it on to others, the property received in
superdari.

The insurance company deducts from claim payable, the recovered property and only the
balance claim is settled by them.

At the time of identification of stolen property or custody under superdari, proper
information must be given to insurance company / surveyor about deterioration of value /
quantity resulting claim.

Should any deterioration in quality takes place in the recovered property, the loss of value
may be considered in the claim by surveyor/insurance company.

2.34. Disadvantages Of Taking Property On Superdari Recovered

If the property has been recovered in some other city in that case insured has to go to that
city court and city police station to obtain possession of the recovered goods at his own
cost.

E.g. Car owner is in Delhi but his stolen car has been recovered in Jalpaiguri in West
Bengal. Now insured has to go to Jalpaiguri police station and Jalpaiguri court at his own
cost along with police to take possession of the car. He has to bring it back to Delhi in
transport spending another say Rs. 8,000.00. Travelling cost including transportation cost
from some other city is not reimbursable under the insurance policy.


Now the insured has to visit the police station and court to take delivery of recovered
property on bond. Having taken delivery does not mean that he can sell it or use it in the
39 | P a g e

manner he wants. He has to safe guard it and produces it in the court as and when asked
by the court.
Property cannot be sold till case is finalised in the court.

The insured has to be present in the court as and when asked till finalisation of the case in
the court on every date. What if one is working in a company and cannot attend the court
dates regularly. Court warrant is issued to call such owners in the court.

Same is the case if in place of car, stock is recovered from by the police. The insured has
to say bear rent to store the property on superdari and still not being able to sell.
Simultaneously pay interest to bank on the loan. The recovered stock may become
useless after lapse of considerable time and not saleable any more.


2.35. Mere F.I.R. Not enough after thought

The role of police is to catch culprits but not to prove quantum of loss. Sometimes it is
seen that policy holder lodges F.I.R. Saying that e.g., jewellery has been stolen but later
on he finds that cash is insured under the policy. So later on he gives another letter to
police that huge amount of cash has also been stolen. Had cash been stolen, then it would
have found strong mention in the initial F.I.R. Moreover, the source of cash if not proved.
The insured never had huge amount of cash at home. The cause of keeping cash at home
is also not proved. Financial standing also does not substantiate the claim of loss of cash.
In such cases mere lodging of F.I.R. And subsequent letter to police may not result into
settlement of cash claim being a case of after thought. Though police may not quash the
F.I.R., they may end up issuing final police report but that does mean that the claim has
to be settled by the insurance company. In such cases police F.I.R. cannot be sole reason /
basis for settlement of claim.


2.36. No mention of stolen stock in F.I.R. / subrogation

Sometimes it is found that police has lodged F.I.R. For genuine case of burglary of say
cash but later on insured says that he has lost stock also in burglary. He proves in books
of account that stock had also been stolen but there is no mention in F.I.R. / final police
report that stock has also been stolen. Insured mentions in F.I.R. That he will give details
of other stolen items later on after checking books of account but he never gives details to
the police. If the stock is recovered later on, then the insurance company cannot get
subrogation rights to recover the stolen goods from the police since there is no mention of
stocks having been stolen in F.I.R. or in final report. As such insurance company may not
settle such claims pertaining to stock loss unless found mentioned in the F.I.R. Or final
police report. The insurance company cannot get proper subrogation rights from the
insured.




40 | P a g e

2.37. Police status report

Status report about recovery or arrest or investigation may be obtained from police before
settlement of a claim. If final report cannot be issued even after 90 days has past after the
loss.

Chapter 3 fire claim
Fire insurance coverage is given for:-

1. Building,
2. Machinery and accessories,
3. Stock and stock in process
4. Furniture, fixtures and fittings.


Insurance of valued policy

In case of insurance of items like work of art, old machinery, manuscript valuation
certificate as acceptable to insurance companies should be provided for insurance of
valued policy.

Source of fire excluded
Loss to electrical machines, fixture or fittings arising from over heating, excessive
pressure, short circuiting, leakage of electricity to machines, fixtures, apparatus directly
affected shall be excluded from the loss. How ever consequential or subsequent to other
machines, apparatus, and fixtures shall not be excluded. In other words the place from
where fire started is excluded for the purpose of fire loss. If say fire stated from main
electrical switch then loss to main electrical switch is excluded and cannot be
compensated to the insured. How ever as a result of fire, other machines and building
including fixtures were also affected and damaged, they would be indemnified under the
fire policy claim.

Papers required in case of fire claim

The surveyor has to understand the business of insured first and then only proceed with
survey and assessment of claim. Nobody knows your company better than you.

1 Profile of the company/ nature of business/ sister concern/directoRs. Is the factory
on rent or self owned?

Profile of the company gives a brief idea about the company and its working. It helps in
knowing business of the insured.

2. Copy of fire insurance policy.

Copy of fire insurance policy is required so that one can check sum insured under the
policy, what items are covered under the policy, what is the policy period, whether the
41 | P a g e

risk is covered under the policy or not, whether address where loss took lace is covered in
the policy or not etc. Policy number is generated in system after the insurance policy is
issued. The policy number contains branch code, nature of insurance, year of insurance
and policy number.

3. Intimation letter to insurance company.

Letter given to insurance company about the loss covers some of the basic facts about the
loss as revealed by the insured. What is the proximate amount of loss? How the loss took
place etc. Immediately on sending intimation letter about a claim, claim number is
generated by the insurance company in their system. Reference to this claim number is
made till the claim is settled. One can ask for claim number from the insurance company
after lodging insurance claim. Intimation letter should also contain policy number under
which claim has been lodged.


4 Claim form with details of items lost.
Claim form is issued by the insurance company. Once the claim on the basis of intimation
letter is registered. Claim form is needed for details of loss, quantity, what is amount of
loss etc. Claim form duly filled up may be given to the insurance company or to the
surveyor during survey.

4. Proposal form.
Proposal form is required to see the intention of the insured for coverage of items, what
are the items stated in the proposal form. Insurance policy is issued on the basis of
proposal form.

A. Re: police/fire brigade

1. Letter to police/police report.
In case of fire, letter is given to the police mentioning about the fire. Copy of letter to
police is taken in order to check whether the fire loss information was given to police or
not. Any information given to police for the first time is taken as the correct information.

2. Fire brigade report.
Fire brigade report reveals cause of fire. In the report of fire brigade it is clearly written
from where fire started/cause of fire/how many water tank were used/what is the exact
time of arrival of fire brigade vehicle/list of damaged items. Fire brigade reports plays
vital role.

3. Letter to police

The local police also gets involved to make sure that the fire has not taken place due to
mischief or if it is intentional or genuine.

4 Newspapers cutting about fire.
Newspaper cutting gives good evidence/proof about the fire.
42 | P a g e


5 Detailed write up of the incident of fire, how it was discovered etc.
What is the starting point of fire/ who had first seen the fire/ when information was sent
to police and fire brigade.
It helps the surveyor to know about the exact detail as to how fire took place. What
happened when insured came. How he came to know about the fire, what steps he had
taken after knowing that fire had taken place. When did he inform the fire brigade and
the insurance company about the loss?


Copies of balance sheet of last three years obtained from c.a. / banks. This would reveal
depreciated value of building, stock and machines over the last three years.
Copies of sales tax / vat returns.
Weight of debris to original (to some extent).
Fire brigade report. This report would contain details of damage to building, machines,
and stock. Cause of fire would be explained.
Police report. Information to police is must in case of fire. They in turn inform fire
brigade. The local police ensure that it is not a case of intentional fire.
Statement of owner / staff / witness about business and fire.
Copy of newspaper cuttings about the fire loss

Newspaper cutting gives some idea about the loss/damage / incidence.

Map of the place detailing near by location and location of machines and store godown.
Bank liabilities. Sanction letter from bank and liabilities on account of building, machines
and stock may be verified.
Manufacturing process. Flow chart of production process and showing use of machines
till final production may be made.
Market report of insured about credit worthiness. Whether the insured heavily indebted in
the market. Did have bad financial repute and not being able to sell his stock. Could he
have interest in the fire? Not being able to run a factory, one can take interest in the fire.
Such cases need detail investigation. Was the business going on smoothly till date of
loss?
43 | P a g e

3.1. Re. Fire loss to machines

Cost of machines as per bills and proof of payment duly supported by bank statement,
machine suppliers ledger, machine purchase ledger and verification from the supplier.
The use of the machine has to be explained in the production process. Present value of
machines duly supported by quotation has to be produced from few suppliers of similar
type of machines to verify if prices have gone up or down. Repairing option may also be
worked out to find if it would be cheaper to allow repair or depreciated value less of
salvage.

For salvage value advertisement may be given in news paper or offer may be taken from
few salvage dealeRs. Salvage value may be deducted from the assessed loss of machines.

For the purpose of adequacy of insurance, total value of depreciated machines at the time
of fire may be compared with the sum insured. In case of under insurance suitable
deduction may be made from the assessed loss.

In case of fire heat may raise causing damage to sensitive parts of the machine. Metal
parts may expand and contract due to pouring of water by fire brigade. This action results
massive
Damage to expensive machines. The damages can be revealed only after close
examination. Apparently they may look not affected but they are not good for production
either. These days machines are run by I.C. And C.N.C. Controllers, these gets affected
due to heat.


Assistance may be taken from mechanical engineer or chartered engineer to find
out extent of damage to the machine. Estimate may be taken from the supplier for
repairing charges of the damaged machines.

Details of saved and affected machines may be taken in the following format: -

Mach
ine

-------
Qty.

-------
Rate/co
st
--------
Value

--------
Serial
no.

-------
Year of
making
-------------
Manufactur
er

--------------
Proof of
payment
--------------

1. Purchase bill copies of machines from suppliers and their
ledger copies
2. Purchase bill copies of machines given to bank for
financing.
3. Quotation of similar machines lost in fire.
4. Depreciated value of the machines as per fixed assts
schedule.
5. At what value insurance was taken.
44 | P a g e

3.2. Re. Fire loss to stock
In case of stock lost due to fire, calculation may be made separately for raw material,
work in process and finished stock. After making inventory of damaged stock separate
list has to be made as per status of the damaged stock. In case of raw materials
verification may be made of purchase bill, challan, payment proof duly supported by
bank statement, suppliers ledger, stock register, excise stock register, verification of
purchase bills / ledger of supplier may be taken from the supplier and rates may be
verified independently from other suppliers as well. For work in process suitable cost for
conversion may be added to the cost of raw material on account of labour portion, power,
over heads etc. Considering the status of work in process. In case of finished goods sale
price less gross profit percentage or cost of production may be calculated and allow lower
of the two. In case of loss of stock, profit cannot be allowed but only cost can be
compensated. Salvage value may be deducted from the assessed loss on account of stock.

Average purchases and sales of each of last 12 months before loss may be considered.
The same may be read with sales tax or vat return. Last three years sales and purchases
may also be considered. Abnormal movements can be easily detected if proper analysis
of accounts is made and justification should be sought.

For the purpose of adequacy of insurance, total value of all stock at the time of fire may
be compared with the sum insured. In case of under insurance suitable deduction may be
made from the assessed loss.
45 | P a g e

1 Stock register.
Stock register is taken to check whether the item lost appeared in it and in what quantity.

Re: Saved stock

1. Detail of saved stock
Item/ Qty. / Wt. / Rate/ Value.

First thing any surveyor or preliminary surveyor would do is stock taking of saved stock
and then tally with stock records and purchase bills.



3. Details of fire affected stock / item / rate / quantity / bills / payment / weight / packing
/ where kept/serial no./supplier/proof of payment/ batch no.

Detail of items burnt is taken from the insured e.g. When purchased, how much payment
was made, from whom purchased, rate of the fire affected items, total value of the fire
affected items etc.



Cost of burnt stock is considered to arrive at the loss without allowing any profit.


Detail of burnt items is taken so that the insured can provide the exact detail of loss.
When purchased, how much payment is made, from whom purchased, rate of the
damaged items, total value of the damaged items etc. Cost of damaged items can be
verified from the purchase bills. Stock register may be verified for quantity of stock with
the insured before fire. Salvage value of damaged stock may be found out, if any. In case
of manufacturing industry cost of damaged stock may have to be calculated on basis of
cost of raw material, processing cost, direct overheads, indirect overheads etc.
Attributable to the damaged stock

3. Purchase bills of lost items.

Copies of purchase bills from suppliers and ledger as appearing in suppliers books.
Purchase bills of stolen items are taken in order to check the genuineness of the claimed
loss. When the fire affected items were purchased/how old was the stock etc.? Various
purchase bills may be verified from the suppliers in case loss cannot be attributed to
specific bill. Average rate may be allowed for the stolen quantity.

The surveyor may also consider sale less gross profit percentage to arrive at cost of sales
and apply this to arrive at cost of burnt items.

Average cost of purchase in the last one year may be considered if it is found that only
recent stock of last one year has been stolen.
46 | P a g e



Re: bank

5. Bank statement of the last 12 months transactions

Whether most of the payments of purchases are made by cheque or not. Cash purchases
are not very reliable and can be easily manipulated to exaggerate the claim.
Some times heavy purchases are found made just before the loss and payments for such
purchases are also not made. Such purchases needs deep scrutiny to find out whether they
were intended to manipulate the claim or were genuinely purchases duly supported by
challan, transport receipt, purchased in the normal course of business to meet sales
orders.

Is there any credit limit with the bank? If yes, copy of stock statement submitted to bank
for last 12 months duly verified by bank.

If insured had taken loan against stock, then he has to give monthly stock statement to the
bank. It also helps the surveyor to check the stock position of the insured as per stock
statement. Is there any difference between book stock and stock as per bank stock
statement, if yes the same may be investigated. Normally year end stock as per balance
sheet and stock statement is same and tallied to each other to avoid income tax problem
and scrutiny by banks.

Problem arises during the year when at the time fire, stock as per stock register does not
tally to stock as per monthly stock statement given to bank. Such cases need to be
investigated in detail. Problem may get further complicated if it is a case of under
insurance. As such it is advised that in case of bank limit against stock, stock statement
should be submitted correctly as per stock records.

6. Copy of sanction letter of limit.
Sanction limit shows how much limit is sanctioned to insured against stock by bank.

Re: books of accounts

7. Up to date books of accounts for verification, purchase ledger, sale ledger &
cash book, sale bills, receipt memo and issue memo.
8. Income tax returns, balance sheet and trading account of last 3 years.
9. Copies of transfer memo of stock sent to others for processing and thus saved.
10. Copy of sales tax return and vat return of last three years.

5. Copies of sales bills from the parties and ledger as appearing in
6. Salvage value of damaged stock.

Provisional trading account showing stock at risk at the time of loss certified by C.A. As
on the date of loss before burglary may be given as follows:-

47 | P a g e

Provisional trading account (before loss)

Amounts
(Rs. P.)
Amounts
(Rs. P.)
Opening stock Sales
Purchases Closing stock
Direct expenses
Gross profit



The C.A. May have to be convinced to certify the provisional trading account before the
loss and need not be audited but compiled on the basis of books of accounts.
Provisional trading account as on the date of loss shows exact amount of stock that was
with the insured at the time of loss to arrive at stock at risk. This will help assess
adequacy of insurance to apply under insurance, if any.


Removal of Debris
.
Before removal of debris one has to make sure that the debris justifies existence of stock
before fire. Only top portion of stock normally gets burnt in fire. The second stock layer
gets damaged. Finally spraying of water will restrict further burning. Though fire can
continue for some time even after fire and thus sporadic fire eruption from time to time
may take place and again need to call fire brigade. How ever 100% burning does not take
place normally. In case of chemicals water may have mixed with the chemicals. Drums
may have been broken or melted. Rough counting can be done about presence of number
of drums before fire. As such nature item lost in fire is very necessary and their chemical
composition. There would be heap of half burnt garments justifying quantity. In case of
medicines mere heat is enough to destroy utility of medicines. Once debris removal has
been allowed there is nothing but books of accounts to justify the claim.

3.3. Re. Fire loss to building

Damage to building may be in a position to repair or remake it once again. Due to heat
and fire the pillars or wall or roof may have to be reconstructed again or even repaired.
Report may be taken from an architect or civil engineer about need to make new shed or
only repair is required. Estimate of cost of repairing may be taken from a civil engineer in
detail. The building has to be reinstated in same situation in which it was at the time of
loss. Should any new addition or improvement is made, the same may be disallowed.
Salvage value on account of metal sheet or iron bars may be deducted from the loss. Cost
of debris removal may be allowed

For the purpose of adequacy of insurance, total value of building appearing in the books
of accounts at the time of fire may be compared with the sum insured. In case of under
insurance suitable deduction may be made from the assessed loss.

48 | P a g e

Assistance may be taken from civil engineer or structural engineer to find out extent of
damage to the building. Estimate may be taken for repairing charges of the damaged
building.

3.4. What if records and books of accounts burnt in fire

In case of fire claims involving building/ stock / machinery, it is observed that sometimes
office of the insured is also gutted in fire resulting loss of records / computers containing
accounts. In such cases the task become more tedious since relevant records in support of
loss cannot be produced. In such cases second line of documents has to be obtained from
various other sources.

3.5. Damaged stock should not be removed before arrival of surveyor

Damaged stock should not be removed till arrival of surveyor or preliminary surveyor for
stock taking of damaged as well as saved stock. Some people remove damaged stock for
cleaning and separation of stock from the shop or factory and thus causes confusion in
assessment of loss. Without personally verifying the situation of fire after fire, the
surveyor is put to difficult situation where he may not be in a situation to justify the huge
claimed loss.

3.6. Cause of fire

Cause has to be covered into the policy. There are certain exclusions which are not
covered in the policy. Fire should not be spontaneous combustion like in cotton due to
say heat or friction.

1. Fire has to be accidental in nature.
2. Cause of fire has to be established.
3. Cause of fire may be say accidental electric short circuit in transformer or main
switch board.
4. Cause of fire is mentioned in the fire brigade report.
5. Cause of fire should not be mysterious, other wise the claim may be rejected.
6. It may be noted that the place where fire originated cannot be compensated.
7. As a result of fire whatever other damages took-place are covered in the policy.
8. Depreciation is deducted for period of use depending on life of asset.


3.7. Loss due to water is also covered in fire policy
In case of fire, loss due to fire can be very little like in case of paper industry, but loss due
to water sprayed by fire brigade can be huge loss. Such losses are not due to fire but
because of water sprayed by fire brigade are also covered in the fire policy.

Loss due to rain / water inundation / flood is also covered in fire policy. During the rainy
season loss can take place in basements due to inundation

Loss due to seepage of water is not covered in fire policy.
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3.8. Fire / water loss in paper industry

It has been noticed that scrap value of paper industry is very different. Paper damaged by
water starts stinking very fast and many policy holders wants lifting cost since it cannot
be kept and neither used. The fact is just the opposite. In paper industry the scrap is made
into pulp again and people are encouraged to walk through the pulp to break the fibres.
Water is added to make it pulp. You sell old news papers at Rs, 5.00 per k.g. And needs
to be made pulp by tearing and adding water. The damaged papers can be easily sold for
Rs. 5 to 7 Rs. Per k.g. Where as cost of fresh paper is about Rs. 12 to Rs. 15 per k.g. Thus
there can be recovery up to 50% of cost even if paper is damaged by water or fire.

3.9. Loss due to smoke or soot in plastic or garments or fabric

In case of plastic items there may not be loss due to direct fire but actual loss may take
place due to heat. Plastic items are badly affected by heat giving way to size and cannot
be used for practical purpose for which it is made. Loss is more to computers due to heat.
Similarly in case of garments industry huge loss can take place due to smoke and soot.
Especially synthetic garments will badly get affected by soot which is a form of carbon
and cannot be washed off the fabric inspite of dry cleaning. More over, smoke smell may
not go with fabric washing. Thus huge loss may take place though on the face, cloth may
seem not affected by fire. Even small hole is enough to spoil the whole piece of garments
or fabric. Due to spraying of water by fire brigade colour bleeding may tale pace
rendering the fabric useless. How ever it may be noted that like paper, fabric or garments
also have salvage value and there are second market in every city. Even fabric cutting can
be sold as scrap. In some cases value of fabric may be very high because of export order
and special manufacturing but the same cannot be used in the local market in case of even
small damage. The salvage value will be very less and same as that of any ordinary
fabric. Loss due to fire is say about 25% but another 75 % of loss is due to spraying of
water by fire brigade. Loss can be reduced by way of use of foam or powdered anti fire
chemicals to stop fire by restricting supply of oxygen.

3.10. Moral Of Insured And Financial Soundness
It is necessary to check whether the insured had majority of able to sell stock or he had
huge bank liability and not being able to pay or he was insolvent in the market since he
could not pay his creditoRs. In such circumstances the insured may be beneficiary of fire
and he may have manipulated the fire to benefit himself out of the insurance claim. Such
cases need to be investigated and substantiated for any foul play.

3.11. In Case Of Doubtful Fire
The preliminary surveyor locally appointed pending appointment of final surveyor may
raise doubt on the cause of fire. The left over burnt debris may not justify huge claim by
the insured. The insured may have lodged several claims in the past causing doubt on the
claim. Financial bankruptcy may justify investigation. Loss may have taken place
immediately after taking insurance policy. The cause of fire may be doubtful.
Terms of appointment of the investigator may be spelled out. The investigation report
may be considered by the final surveyor in his report.
Report may be sought from forensic department to find out if the fire is manipulated.
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3.12. Technical report from another specialist
Technical report from another specialist e.g. Engineer having experience about possibility
or repair or alternative good use
Of the damaged articles. This way loss can be reduced.

3.13. Assess loss even if claim not admissible
Some times surveyor may find that the fire or burglary loss not covered in the policy due
to any reason what so ever including he is not convinced about the fire or proper books of
accounts in support of the claim has not been produced by insured or insured has not
cooperated in assessment of loss. In such circumstances at a later date the insured may
win a case in the court after a few years of legal battle. It may be too late to assess the
loss after passage of long time. The court may end up giving order that the claimed
amount may be paid to the insured and to avoid such court judgements the surveyor may
assess the loss to the best of his capability should the claim has to be paid in future due
any reasons what so ever. The surveyor can even state that assessment of loss should not
mean that the claim is admissible under the policy.

3.14. Collapse of roof in fire

In has been seen in many cases that fire causes intense amount of heat and the roof
collapses causing bigger loss. These roofs are mostly settled on iron angles supporting
stone slabs. Intense heat in the closed godown or factory causes the iron angles to bend
and the roof collapses. As result the loss increases and it becomes more difficult to take
out the saved stock. Normally roof would not collapse in RCC constructed rood. It is
better to avoid keeping expensive stock in such angle supported roof godowns.

3.15. Certain allowable exclusions for self insurance

Under standard fire policy it is allowed not to take insurance coverage of storm, tempest,
flood, inundation risk ( STFI) as well as risk of riot, strike, malicious damage and
terrorism damage (RSMTD). It would be a case of self insurance if these coverages are
not taken. The insurance premium would be less but at huge risk of self coverage in case
of loss. One should not step into the trap of less premium by excluding these risks in the
fire policy.

3.16. Minimum deductible and voluntary deductible

5% of each and every claim will be deducted subject to minimum Rs. 10,000.00 in
respect of each and every loss due to act of god (AOG) perils like lightening, STFI,
subsidence, landslide and rock slide covered under the policy.

Similarly one may have to pay less premium by way of discount if he opts for voluntary
deductibles under fire policy and the minimum deductible amount can be as low as Rs.
10.00 lacs for act of god and Rs. 5.00 lacs for other perils.


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3.17. Mid-term change in sum insured

In case of fire policy it is allowed to increase or decrease sum insured, while the policy is
in force.

3.18. Add on covers

By payment of extra premium one can take certain add on covers along with standard fire
policy. Some of these are as follows:

1. Deterioration of stock in cold storage due to power failure as a result of
damage at the insured premises of power station due to insured peril.
2. Deterioration of stock in cold storage due to change in temperature arising
out of loss or damage to cold storage machinery in the insured premises
due to operation of insured peril.
3. Spontaneous combustion. Such losses may take place in cotton factories,
chemical factories etc. Where fire can take place on its own fermentation,
naturally heating or spontaneous combustion. Loss is allowed only if fire
has taken place and not otherwise. Insurance premium is charged as per
category of goods. For category i goods insurance premium is minimum
and highest for category iv goods.
4. Omission to insure addition, alteration or extension of buildings,
machinery, plant and other contents which the insured may erect or
acquire at a later date in the factory during policy period.
5. Earthquake (fire and shock). Our country has been divided in four
earthquake zones and accordingly insurance premium is charged.
Insurance premium is highest in zone i and lowest in zone iv.
6. Loss due to leakage and contamination.
7. Additional expenses of rent for alternative accommodation.
8. Start up cost necessarily and reasonably spent by the insured consequent
upon a loss covered by this policy.





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3.19. Loss assessment can never be exact

Especially in case of fire loss exact assessment of loss is not possible in most of the cases.
The loss is assessed on approximation basis on the basis of physical verification made
and proof collected from relevant books of accounts and circumstantial evidences. E.g. In
case of fire in a garment shop or factory one cannot identify the item from the burnt
fabrics or garments. Exact tally cannot be made to the stock register in a going concern.
Effort is made to reduce the error in calculation by estimating the quantity affected by
fire. One has to finally rely on the books of accounts after being satisfied that loss had
taken place. Even from burnt fabric/garments one cannot make out from the ashes mixed
with mud/water how much was the exact quantity before fire.


3.20. Fire policy by transporters

Fire/riot/ strike/burglary policy can be taken by transporters as well covering risk of fire
against goods held by them on behalf of consignor by charging freight and insurance. Big
transporters also provide storage facility to many a customer at their godowns by
charging storage charges. In case of fire the transporters can lodge claim against the
insurance policy taken by them. For cost of goods the consigner can be approached for
bills.

3.21. Fire season, high voltage and its after effects

There are very high probabilities of fire during Diwali, Vishwa- Karma Puja. During
winter fire takes place due to excessive use of heaters and heat convectoRs. Fire due to
high voltage from electricity power station is very common during summer. Normal
voltage is 180-280 and fire can take place if voltage is say 350-400 sometimes at when
the factory is closed. In such cases fire take place due to high voltage. Nothing can be
saved if such high voltage is at day time when the factory is running. Due to high voltage
whole of the factory can be gutted in fire. Adequate fire safety measures by way of fire
safety audit, fire extinguishers, checking loose connections, avoiding sparking in electric
joints, weak insulated / molten / old / naked wire. Inflammable items should not be kept
near electric points / bulbs. As a result of fire insurance companies will indemnify the
depreciated actual cost basis loss of machines and stock, but what about loss due to
stoppage of business, breaking of link with suppliers, payment demand from suppliers,
not receiving payments for supplies already partly made, business restarting expenses,
over heads, loss of profit, payment of interest and instalments to bank, new machines
have to be bought at higher prices leading to financial hard ship.

One has to take utmost care in case of use of highly inflammable fuels, boiler or heating
of fluids at very high temperature. Leakage of these items can cause immediate fire. In
case of leakage of acid or heated fluid or petrol you have no way but to run for life,
instead of fighting fire. This type of fire is almost impossible to stop till factory turns to
ashes. Once fire catches in plastic items or paper or clothes, fire keeps on reigniting even
after a few days of fire fighting efforts.

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3.22. Valuation for insurance on depreciated value or reinstatement value of
machines
Value for insurance of building, new machines, furniture & fixtures can be considered at
depreciated value or at reinstatement value. E.g. A new machine costs Rs. 10.00 lacs to
the insured and he can insure it for the same value. Next year he may consider say 10 %
depreciation for it and the value comes down to Rs. 9.00 lacs. How ever the new machine
price may have increased to Rs. 11.00 lacs since there is increase in dollar value or
increase in excise duty or increase in price by supplier. In such a case the insured has an
option to insure it for depreciated value of Rs. 9.00 lacs being market value of similar
type of machine or insure at reinstatement value of Rs. 11.00 lacs and pay insurance
premium accordingly. In case he wishes to insure it at depreciated value, in that case his
value as per fixed assets schedule may be enough and accordingly pay less insurance
premium on Rs. 9.00 lacs.

On the other hand he may opt for reinstatement value and declare to the insurance
company his intention t insure value of Rs. 11.00 lacs being cost of similar new machine
without depreciation and accordingly pay insurance premium. In such a case he has to
provide valuation and intention to take coverage of new machine apart from payment of
premium on reinstatement value. Suitable present day quotation and valuation report
may be taken from an engineer or valuer. Otherwise it would be presumed that the
renewal has been done at depreciated value as per his fixed assets schedule.
Similarly buildings can be insured at depreciated value or at reinstatement value. Over a
period of time building starts depreciating but cost of material and construction cost
keeps increasing. After say 10 years the depreciated value remains half but reinstatement
value increases to double of original cost due to increase in labour cost and cost of
cement, bricks and iron bar. These factors need to be considered at the time of fresh or
renewal of insurance policy. Suitable valuation report from architect or civil engineer
may be taken for reinstatement value.

It has been noticed that renewal of insurance is a routine matter for most of the
companies. Premium calculation is made and cheque is given to the agent. Where as
before policy expiry takes place discussion should be made by insured for proper
coverage, technical details should be discussed, additional documentary requirements,
valuations for premium calculation, addition of any new premises, stock insurance at
higher value considering business expansion plan, additional risk coverage, valuation of
building, uninsured items bought during the last year etc. Renewal of insurance should
not be routine job but it should be considered as risk management. Should unforeseen
circumstances results losses due to flood, earth quake, riot, fire in the premises, burglary,
theft by staff etc. is the insured premises ready for such calamities and adequate coverage
has been taken in the insurance policy. Normally such meeting takes place only after loss
takes place and insurance agents, technical persons, consultants are called for guidance
till next mishap takes place.




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3.23. Ask For Terms And Conditions A The Time Of Renewal

To avoid confusion one can ask the insurance agent to bring latest terms and conditions
to the standard fire policy to verify coverage allowed and exclusions made. Every now
and then changes are made by insurance companies in the policy and its terms and
conditions. The insurance policies and terms and conditions are filed with the IRDA for
approval. These cannot be changed at will later on. Verification of terms and conditions
in advance ensures proper decision. E.g. It may be possible that in one year terrorism
cover had been offered with payment of extra premium while storm was automatically
included in the standard policy. In the second year terrorism is automatically covered in
the standard policy but storm is separately covered on payment of extra premium. In the
first year you suffered loss of say Rs. 5.00 crores due to terrorism and did not get claim in
spite having standard insurance policy due to not paying additional premium for
terrorism. In the second year you suffered loss on account of storm of Rs. 4.00 crores and
you again did not pay additional premium for storm coverage. Both the claims were
repudiated on the grounds of non coverage worth Rs. 9.00 crores while you had standard
fire policy.

3.24 Fate Of Rejected Claim After 12 Months.

After liability of a claim has been rejected by insurance company and 12 months have
passed since then, in such cases insurance company will not be liable for such claims
unless any suit has been filed before expiry of 12 months. For example insurance
company had repudiated a fire loss claim on 12 1-2007 and the insured did nothing in
between except say writing letters or meeting insurance company officials till 12 -1-2008.
He did not file any suit in the meantime neither filed for arbitration, and then such claims
will be deemed to be abandoned and cannot be revived.

However it is a matter of interpretation whether the insurance company is legally correct
in restricting limitation period in violation of contract act which allows three years
limitation period.

Chapter 4

4. Requirement of papers in case of claim of loss due to flood

A. Re: lost items

1. Details of loss in the following format: -
Sl. No.

----------
Item

--------
Qty.

-------
Value

----------
Amount

------------
Purchase bill
---------------
Proof of
payment
--------------
Extent of
loss
--------------

In flood loss, it may be possible that some items were fully damaged and some are
partially damaged needing repair or cleaning. Exact calculation of loss may be made of
the damaged items.
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2. Quotation for repairing of fully or partially damaged items.
Surveyor can ask for quotation of repairing of partially damaged goods. If the goods are
repairable then it is not necessary to pay the full claim amount for those goods. It helps in
minimisation of loss.
In case of food items, loss due to flood may be minimised by taking quotation from cattle
feed suppliers who may buy them for cattle. For other items there are many scrap
Dealers who find them good bargain at cheap price. Electrical items may be repaired after
spending some amount and then sale them as second hand. Fridge TV. Etc. May be easily
repaired to make them useful by certain category of customers who are ready to pay less
price for them.

3. Technical report of fully damage items.
Surveyor may take technical report of damaged items in case of electrical or mechanical
goods that they are beyond repair.
4. Details of damaged stock / item / rate / quantity / bills / payment / packing / where
kept.

Detail of items damaged is taken from the insured e.g. When purchased, how much
payment is made, from whom purchased, cost of the items, total value of the items etc.

5. Detailed statement of how the loss took place.
Exact cause of loss may be arrived at after in depth inquiry about the loss. Whether there
was rain in that area may be supported by news paper reports as well.
.
4.1. Loss due to flood/ inundation

Loss due to flood or inundation is covered under fire clause. Separate policy for flood is
not issued by insurance companies.

Should there be loss due to flood, in that case damaged stock to be separated. Steps
should be taken to minimise the loss. The damaged food can be used for cattle feed and
thus loss can be reduced. Cost can be verified from bills. Photographs can be taken of the
damaged stock. Some of the damaged stock likes soap, washing powder etc. Can be sold
at reduced price and the insured himself can be one to offer best price. A letter can be
signed by the insured to accept the damaged stock as per agreed rate and value. Balance
value can be allowed as loss.
In support of flood, copies of news paper/ meteorological report can be taken. Else photo
graph can be taken to establish flood.


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4.2. Flood / inundation due to blockage of drain

What do you think caused flood in Mumbai in the year 2005 and 2006, its due to
blockage of drains. Drainage system in cities fails during sudden heavy rain and you are
prone to flood losses if you factory, shop, house is on the ground floor. These are the
days of climate change and rain may be very heavy at times and above average rain may
cause more inflow than the drainage system can handle. More over before the rain season
inspite of all claims by municipalities the drainage system chokes and caused rain water
to over flow on the roads leading to factories, shops, houses. In 2006 flood came in
Gujarat causing huge loss due to flood. There is hardly any state including Bihar,
Tamilnadu, Andhra Pradesh, Uttar Pradesh, Orissa, Assam, and West Bengal which is
immune to flood during rainy season. . Nothing can stop rain water once it over flows
drains or riveRs. Not to mention basements and low lying areas are first victim of
inundation. During rainy season even if you find heavy rain may cause flood, you have
no way of removing stock, machines, and house hold items to safer areas. Flood does not
spare any one, be it poor or rich.

Flood/inundation takes place due to blockage of drains and you do not have any way to
cover you against flood on Saturday or Sundays.

As such planning against flood loss is very important and this way you at least safe guard
against loss of value of items insured. There is barely any cover available to small policy
holders against consequential loss due to flood e.g. Loss of business, loss due to
depreciation of insured items, loss due to disruption of business or loss of life etc.

As such taking coverage against flood is very important. In shop keepers policy, house
hold policy, coverage for flood/fire is bundled together in the policy.



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Chapter 5

5. All risk shop keepers policy

These days insurance companies provide various all risk policies, such as, shop keepers
policy which is an all risk policy. The benefit of all risk policy is that they cover various
risks which are otherwise difficult to get and are more expensive. Shop keepers policy
provides among other things coverage of theft, fire, terrorism, infidelity of staff, cash in
safe etc. One does not have to take separate policies for burglary in which coverage is not
given for theft without use of force, whereas in shopkeepers policy theft is automatically
covered. The all risk policy is inbuilt one to cover several risks in one policy. Thus lot of
time and energy is saved as a result of taking all risk shop keepers policy. As far as
possible one must try to take all risk policy in place of separate policies. Now a days
shopkeeper policy can be issued for sum insured up to Rs. 1.00 crore. This policy can
also be taken by shops that have godown facility as well. Small factories cannot take this
policy since they are not shop keepeRs.

5.1. Precautions by shop keepers/ factories

Most of the shop keepers normally use shutters to close their shops. Burglaries from
shops are common affair. It has been noticed that at night time a tempo or truck is parked
out side the shop. Later on the shutter is pulled apart by tying a rope to the hook of the
shutter and tied to the truck and the shutter breaks apart. Other wise a jack can be inserted
in the gap of the shutter and floor. The jack can lift the shutter on winding it up like
jacking up a car. The shutter can be protected by fixing magnetic catch to activate siren
or phone in case of unauthorised opening of shutter. But what if the shutter is cut from
the middle or plate is taken out to enter the godown.

In such cases movement sensors costing not more than Rs. 10,000 can be used linked to
mobile phones/ siren. If some one enters the premises after the system has been activated,
then on unauthorised entry siren may blow or one may link it to mobile phone for
warning of burglary? These system can also be used effectively by factories in remote
areas to safe guard their godown or plant. Mere security guards are not enough unless
supported by electronic security systems. Even

5.2. Loss in electronic shop

In case of electronics items affected by water/fire, stock taking is the first step. Stock not
affected has to be separated from damaged stock. Then separation has to be made from
the angle of fully damaged and the one that can be repaired. Effort can be made to get
them repaired to minimise loss. Estimate can be taken from repairing shops. What ever
cannot be repaired has to be viewed from the angle of scrap value. The insurance
company is not going to lift the damaged stock but the insured has to make efforts to sell
the scrap. Insured has to act as if they are not insured and take all possible reasonable
what they would have done had no insurance policy been there. Finally cost of repairing
may be allowed as loss so long as it is justifiable. Scrap value can be different for
different materials. Certain items can fetch very good scrap value while some may not
58 | P a g e

fetch any scrap value. Supplier can be approached for providing damaged parts.
Advertisement can be given in news paper to dispose off damaged items or near by
people can take interest in buying the damaged stock.

5.3. Loss of stock from shop under section I
In case coverage has been taken under section I for building as well as contents
(excluding money and valuables), then loss of various items including stock due to theft
without forcible entry is also covered in the policy.


5.4. Loss of stock from shop under section ii

Against house breaking risk for contents (excluding money and valuables.)

Coverage has been given for loss of stock excluding valuables due to burglary by forcible
entry or exit only and not by theft without using force.

5.5. Loss of cash from premises in shop keepers policy

In all risk shop keepers policy, loss of cash has been covered including loss due to
misfortune. At night time it is not necessary to keep cash in safe, cash can be kept in steel
cup board/ steel cash box under lock and key. But loss of cash from unattended vehicle is
not covered in the policy.

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Chapter 6

6. Requirement of papers in case of cash in transit loss claims

A. Re: cash lost

1. Denomination of cash lost.
Detail of cash lost in denomination wise must be taken by the surveyor.
2. Proof of cash sent.
Proof of cash sent must be checked by the surveyor e.g. Cash book/cash inward and
outward register etc., bank pay in slip if cash was to be sent to bank, cash voucher signed
by cash carrying employee.

B. Re: employee

1. Copy of attendance register/appointment letter/salary certificate.
Detail of employee who was carrying the cash.
C. Misc.

1. System of collection and depositing cash.
What is the system of carrying cash from one place to another? Was the same routine
route followed every time or some changes were made in the route.
2. Detail of box/bag in which cash was carried.
Colour/size (l x b x h)/lock/make/volume/weight
Volumetric analysis of the container in which cash was carried should be made to check
whether the claimed cash can easily be accommodated in the container as specified by the
insured.

3. What safety measures were taken as per insured while depositing /carrying cash.
Proper safety measures have been taken by the insured or not? While carrying cash, the
box containing cash was chained up or not? Whether any security guard was
accompanied while carrying cash etc.
4. Copy of security investigation report conducted by the insured, if any.
Copy of security investigation report may be provided to the surveyor, it helps the
surveyor in knowing the exact position/security measures taken while carrying the cash.

5. Copy of R.C. Of vehicle in which lost cash was carried. Exactly how many staff
was present in the vehicle at the time of incidence and their statements about how
the loss took place. .

6. Detail of route taken by the insured on the date of loss.

6.1. Cash in transit / money insurance justification
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In case of a claim, presentation of cash book, voucher duly signed by the person carrying
cash, employment proof, balance cash in hand, how cash was accumulated, cash
denomination, under what circumstances loss took place. Volumetric analysis of cash in
bag etc. Total cash turn over till the time of loss is of immediate significance.

Financial position of insured to rule out wrong claim intention or exaggeration of claim
amount.

6.2. Money should be in custody only

In case of loss to money under money insurance money has to be in the hands of the
employee in transit. Cash must not be lost from unattended vehicle.

6.3. Cash in transit / money insurance policy

In case of cash in transit policy care has to be taken while mentioning mode of
transportation of cash. In case of mention of car/train/bus/three wheeler as mode of
transportation, then cash transported on cycle cannot be treated as compliance of policy
terms and condition. Carrying of cash in bicycle had increased chances of loss in transit
and as such claim can be rejected by insurance company.

6.4. Cash carrying staff

Similarly, these policies find mention of person who can carry cash. If cash was to be
carried by cashier, in that case cash carried and lost by some other person cannot justify
coverage of loss. So cover may taken for any one employee of the company in place of
restricting only to cashier. .

6.5. How cash to be carried how and by whom

At the time of taking insurance policy, care has to be taken as to how and who will carry
cash apart from cash to be carried in bag or brief case. Coverage should be sought as
Wide as possible and not restricted one.

6.6. Proper coverage of office/ residence/ bank and vice versa

Cash from office or residence to bank or vice versa or cash from residence of insured to
bank or office and vice versa should be clearly mentioned. Whether intention is to cover
all banks or particular one needs clear mention. In case of cash sent o a bank not covered
in the policy will be difficult to cover in the event of claim.

6.7. Route of cash carrying should be approximately straight

Cash from office to bank cannot cover a route, if the employee was going to some other
place other than bank.

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6.8. Keep enough balance for year round cash in transit

Estimated total amount of the money in transit per annum should be as wide as possible
to cover any loss and not be out side estimated amount of cash in transit by wide margin.
Calculation should be done from time to time to find out if total estimated amount in
transit has exceeded and additional amount is further required under the policy. The
insured would be within his right to get a claim even if total turn over has exceeded the
estimated turn over at the time of loss during policy period by paying additional premium
for the extra turn over.

6.9. Heavy cash break the trip to spread cash risk

Effort should be made to send cash to bank not in one trip but broken in more than one
trip, if more cash than permitted amount at one time under the policy is required to be
sent to bank. E.g. In case of limit of any one loss of Rs.15.00 lacs, Rs. 30.00 lacs can be
sent to bank in two rounds of Rs. 15.00 lacs each time in place of one trip containing Rs.
30.00 lacs beyond policy condition.

6.10. Over night cash in safe is also covered in cit policy

In case of cash in transit policy, over night cash in safe is also covered against loss due to
burglary.

6.11. Infidelity of cash carrying employee

Infidelity of employees carrying money is also covered in the policy.

6.12. New branch not added in policy

In case of change of address or new branch being opened, in that case immediate
information should be given to insurance company otherwise loss concerning such
branches would not be deemed to be covered in the policy.

6.13. Loss from unattended vehicle

Loss from unattended vehicle is not covered in the policy. E.g. Insured had gone to
another office while keeping the cash in scooter dicky or car. On return he finds that the
cash from the unattended vehicle has been stolen by breaking the dicky or glass. Such
losses are not covered in the policy on two grounds of not taking reasonable care as well
as loss from unattended vehicle.

6.14. Risk of cash in transit

To avoid risk of heavy or regular cash dealing with bank, these days private banks are
offering cash remittance or withdrawal facility at nominal charges at your door step. The
security agency hired by the bank would visit your business premises regularly to collect
cash for deposit in the bank. The receipt issued on behalf of bank by the security agency
62 | P a g e

would be valid for immediate cash credit in your bank account in case of any mis
happening in transit. This way one can avoid cash in transit risk as well as save man
power. Insurance policy is taken by the cash carrying security agency covering transit
risk at nominal premium in view of huge cash in transit at any moment of time spread
over the whole country.


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Chapter 7

7. Jewellers block policy

This is another all risk policy for jewellers who are covered for various risks including
theft bundled in one policy. Several risks are covered under one policy.

7.1. Only cost is compensated

In case of loss, the insurance company is liable to compensate only up to the extent of
cost of the stolen gold. Say loss took place in March 2008 of 1 k.g of gold which costs
the policy holder Rs. 6.00 lacs in the year 2005 as per purchase bill. The insurance
company can pay claim up to Rs. 6.00 lacs only though the present price of gold may be
Rs. 12.00 lacs for 1 k.g.


7.2. After loss settlement recovery goes to insurers

In case of recovery of say 1 k.g. Of gold by the police after settlement of a claim, the
insurance company will take possession of the same from the police, in view of
subrogation rights taken from the policy holder at the time of settlement of claim.



7.3. Safe of standard make

Normally in the insurance policy or proposal form it is mentioned that stock shall be kept
at night in safe of standard make. What is standard safe is something debatable and not
defined any where. But the safe should be burglar proof and should be able with stand
break attempt. It is not necessary that only godrej safe are burglar resistant.

7.4. Storage of stock in safe as per proposal form

In the proposal form if the policy holder has mentioned that he has a safe of godrej make
and at the time of burglary it is found that he has say local kamal make safe which was
broken and burglary took place of gold jewellery. In such a case the insurance company
may be within their right to reject the claim. What is mentioned in the proposal form and
being part of agreement cannot be allowed to be altered to advantage of the insured. As
such correct disclosure should be in the proposal form while taking insurance policy.
Similar judgement was given by the supreme court in the case of Oic vs Samayanallur
primary agricultural coop. Bank case ref. Jt1999 (9) sc9.

7.5. Stock kept out side safe at night

There is difference between silver jewellery and silver items. Bulky silver items or other
stocks including silver jewellery or stones are normally kept by jewellers out side safe at
night time. Suitable cover should be taken for covering such stock. Stock kept out side
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safe can be in the window display or in the counters or in drawers or cupboards. Specific
cover is available for stock in the display window. Similarly in the proposal form suitable
mention should be made for stock out side safe at night time for stock kept in the counter,
drawers and cupboards.

7.6. Proposal form is basis of insurance

It may be noted that proposal form is the basis of contract if the insurance policy is
issued. In case of any interpretation of coverage, proposal form is referred as basis. If it
is mentioned in the proposal form that whole of the stock other than gold jewellery shall
be kept outside the safe, in that case insurance company cannot repudiate claim
pertaining to say stolen silver articles or of stones not kept in the safe.

7.7. Safety features of camera for jewellers

With advancement of technology feature of live camera and its continuous recording for
24 hours in the computer are no longer expensive matter. Even six cameras can be
simultaneously recorded for 7 days in the computer having say 160 GB memory hard
disk. Total system does not cost more than Rs. 1.00 lac and all unmanned. Value one
k.g. Of gold is now a day about Rs. 12 lacs and average stock of 5 k.g would require not
less than Rs. 60 lacs worth of stock apart from show room cost or rent. Jewellers are
always target of burglary since ages. Additional safety feature like recording camera
should always be welcomed by jewellers

Even 24 hours recording may be made by a small recording camera to watch unwanted
movements by security guard or some one approaching the show room from the rear side.
One watch man may be kept on duty inside the show room to be relieved only in the
morning after the show room is opened.

7.8. Discount for safety and security.

One should not resort to obtaining unnecessary discounts for security measures like 24
hours watch man, CCTV etc. While one may have CCTV but it may not work on the
day of burglary due to maintenance problem. The security guard may not be present on a
rainy day. Thus obtaining small discount in insurance premium may become a cause of
irritation if claim arises when there is violation of security condition as per insurance
policy or as per proposal form filled by the insured.

7.9. Stock inside grill but not in safe

Many a places in India jewellers or security companies have the practice of keeping gold
stock or cash in side strong grill. They may not keep stock in the safe. The stock kept
inside the grill is equally safe as if kept in a strong room. Suitable declaration if made in
the proposal form may be enough to cover such stock in the insurance policy. Other wise
insurance companies may not accept the claim. As per proposal form or insurance policy
stock of gold jewellery must be kept at night in safe only.

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7.10. Safe is unsafe without latest feature

Thieves keep on attempting jewellers all over the country. They are one step ahead of
security measures. They join hands with other anti social elements to upgrade their
knowledge. But they can be beaten by technology only. Stand alone safe have been
broken like piece of paper by inserting heavy duty hydraulic jacks or by hammering on
door ends to make the side safe wall bow like and thus give way. With the help of high
R.P.M. Cutters the safes have been cut from rear weak side. As such it is very important
to add features like motion detector or magnet catch in the safe to activate siren/ mobile
phone warning / Security Company.

7.11. Safe should be fixed in the wall

Safe is more of safe from the front side but not on sides. Safe derives its biggest strength
once it is fixed in the wall from three sides. Such safes cannot lift and stolen. Safe if fixed
in the wall makes it much stronger since cutting it from front side is quite difficult. Front
door metal used is almost cut proof. But on sides there are only two plates of metal sheet
and RCC in between. Front safe door contains no RCC. Once fixed in the wall, its side
wall cannot be hammered to a bow or cut to make gap. The better the material used in
reinforcing it in the wall, the stronger it will be. The rear and two side walls may be
reinforced with good quality RCC containing metal pieces as well.

7.12. Safe is safer if there is no protruded side

Safes should be plain on front ends and not protruded curves. These can be hammered to
a bow if ends are protruded. Similarly there should be no gap in between the door or safe
wall, so that hydraulic jack ends cannot be entered in the gaps to tear off the safe door.

7.13. Safe number lock not working, then its not safe.

Many a safe are old and one lock or number lock does not work. Such old safes are not
trust worthy and fails basic requirement of burglar proof safe. Using such safes for
keeping valuables is invitation to burglary.

7.14. Motion detector at night

Motion detectors in the safe room or in the show room are good safety measure. The
same can be connected to the cell phone of owner or employee who stays nearest. Mere
connecting the motion detector to sire can have nuisance value. But link to cell phone
may go a long way to protection.

7.15. Guard to protect factory at night time

During holidays and night the factory is protected by employing guards through security
companies. Now a days involvement of guards in burglary is another cause of burglary.
During night time camera can be fixed at a height having focus on the main gate, and
other three corners of the factory. Power to the camera can be given by battery and linked
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to computer for recording. Leaving night guard to talk to strangers at night or they
commit nuisance in the factory or sleep at night time can be checked by way of camera
recording. Camera can have good effect on the security guard to act diligently at night.

7.16. Storage of stock in almirah

Godrej iron store well or almirah having a locker in the middle used by normal house
hold cannot be termed as safe and burglar resistant by no stretch of definition of safe. If
these godrej almirah have been mentioned as safe in the proposal form, then its mis
declaration and such claims may be rejected if loss takes place. It is clearly mentioned in
most of the policies that the claim of loss from something which is not safe cannot be
entertained even if policy issued.

7.17. New safe bought

If during the policy if a new safe has been bought, in that case intimation may be given to
the insurance company about the new safe and obtain suitable endorsement to the policy.
The old insurance policy does not cover loss from the new safe how so ever strong it may
be.

7.18. Stealing by operation of key
If loss takes place by opening the safe by using the key of safe, in such a case the claim
would not be entertained. E.g. Key to safe is kept in the show room during day time. The
owner goes out of the show room for 5 minutes leaving the key in the show room and
some one takes the key and steals gold. Such a claim is not admissible unless key has
been taken by force or by threat to life.

7.19. Loss due to infidelity of employee
In jewellers block insurance policy infidelity of employee if excluded, in that case loss in
which the employee is involved will not be covered under the policy.

7.20. Stock to other cities for sale or return
Jewellers do carry gold jewellery to other cities for sale or return. In case of any loss of
gold jewellery due to dacoity, or other wise, proper challan should be there, mention
should be there in the F.I.R., the other party two whom these were shown must confirm
presence of such gold jewellery to justify a claim.

7.21. Stock in another safe not in strong room
At the time of taking policy, the insured makes mention of safe in the strong room but
loss may take place from another safe not in the strong room. In such cases care should
be taken to mention about the safe out side the strong room for coverage in the insurance
policy. Other wise the claim would not be entertained.





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7.22. Stock left in unattended vehicle
Stock of gold is normally carried in a vehicle from one place to the other within city or
outside the city, it is very important to note that gold must not be left unattended.
Such a claim would not be considered by the insurance company. Such a case of loss is
clearly covered under exception to the policy.


7.23. Basis of valuation
In case of claim under jewellers policy, the basis of valuation is normally cost plus 10%.

7.24. Important exclusions in jewellers block (jb) policy

1. Stock not in custody of directors, is not covered if stock is left unattended. Stealing
from unattended vehicle is not covered in the policy.

2. Stock at premises other than that of broker is not covered in the policy while not
attended by the broker.

3. Loss in due course of cleaning.
4. Loss discovered during stock taking.
5. Loss while the property is in public exhibition. It needs separate insurance policy
for such exhibition.
6. Loss due to infidelity of staff, cutter, customer, angadia, gold smith, family
member of insured.
7. Loss by opening of safe by use of key/ duplicate key unless obtained by force.
8. Loss by mysterious circumstances.

7.25. Same policy for diamond manufacturers as well as jeweller showrooms.

Unfortunately requirement of jewellers and diamond manufacturers are different but they
have common policy. As such it is best to enclose a separate letter specifying their exact
risk coverage requirements. In case of jewellers their gold smiths do not work for them
exclusively but for any one who gives them work. The gold smiths keep changing and
may be in different towns as well. The gold smiths are completely in unorganised shape.
Verification of bills of gold smiths after lapse of some time is very difficult due frequent
changes in number gold smith who works for the jewellers, rendering it futile to cover
them within city or out side city non dedicated, not in house gold smiths. Many a times
jewellers make purchases including from customers against cash of old gold jewellery
from not very identifiable sources. The purchases increases stock at risk but cannot be
confirmed by surveyor in case of a claim. More over they do not maintain piece wise
stock register most of the times.

Whereas diamond traders are in organised sector. They have full control over the
job worker firms who either work in the insureds premises or in some other premises
exclusively for them. Proper bills are raised and payments are made cheque after
deducting TDS. The rough diamonds are properly accounted for by way of return of
polished diamonds and rejections supported by yield mentioned in detail.
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Maintenance of daily stock register containing quantity, quality, value, details of sales
and purchase is very important for jewelleRs. Otherwise one cannot make out how much
stock was with the jeweller at the time of loss. Insurance company is not responsible for
unaccounted gold stock. Normally it is noted that jewellers do not maintain piece wise
stock register. They would simply maintain stock register on totality basis e.g. Total stock
weight say 5.00 k.g. Of 22 carat or 20 carat. They would have tags mentioning item,
weight of gold, purity, weight of stone with each piece of jewellery in display and in safe.
In case of burglary of gold jewellery it cannot be expected that the thief would leave the
tags. In such cases if partial loss takes place, then balance stock saved has to be weighed
to find out how much is stolen. In case whole of the stock has been stolen in that case
volumetric analysis would be required to find out what was the total stock at the time of
burglary.

7.26. Common tricks

Guarding one self against these common tricks can save you from loss of valuables,
laptop, jewellery, cash in transit

7.26.1. Dirty material on your clothes

The cheat can put some dirty material on your clothes and force you to go to the nearest
place for cleaning. One of the cheat may also offer to help you clean. In this process his
other accomplice may run away with the bag containing valuables, while you are busy
cleaning yourself.

7.26.2. Left side tyre puncture indication

While you are driving the car and stop at a red light, cheat can knock on your left window
to say that the front left tyre is deflated. You cannot see the front left tyre seating on your
steering and there is no way but to come out and see it for yourself. You would not like to
drive punctured tyre, since it may cut the tyre and tube. These reactions are spontaneous,
forcing you to stop. More over the front tyres are always a little deflated due to weight of
engine. Mind it, another cheat is also on a scooter on your left, while his accomplice is
just behind your car awaiting you to get out to inspect. The moment you get out of the car
the cheat opens the right driving side door or rear right door to take out the brief case and
run on the opposite side. You realise the theft only after you have settled in the car and
notice the missing brief case. In the mean time the cheat has already vanished with the
valuables and the scooter borne cheat plus who warned you are also vanished.

7.26.3. Forced accidents to stop you

If you are smart enough not to come out of the car, the cheat may finally cause small
accident with your car and force you to stop. Once you get out of the car, his accomplice
may take out the bag containing valuables from you car. Finally the scooter borne cheat
may simply compromise and let you go. Later on you notice the missing bag.

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7.26.4 brief case on rear seat
Leaving brief case on the rear seat is what most people do. This delays discovery of
missing brief case and gives ease of stealing to cheat by opening the rear door or from the
rear side glass.
Brief case should always be kept in the middle of two front seats.
If you have another partner with you in the car the brief case is within his reach or if you
are alone, then it is within your eye sight.


7.26.5 throw cash on road to cheat you
If you are walking on the road with valuables, the cheat would spread cash on the road/
floor just ahead of you to notice. How can you step on cash or ignore cash. You fall in the
trap of greed for a second and that is what the cheat is looking for. You pick up the road
cash, he picks up your brief case and coolly vanishes in the crowd. His other accomplices
make sure you do not chase him.

7.26.6 not safe in car parking also
You carry valuables and you are under surveillance of the gang of cheat. The cheat are
also professional and make dry run on the routes taken by you. Thus they familiarise
them selves with your habits. You may get down from the car or bus to ease your self or
to buy cigarettes or to take food or park the car in parking area. The cheat awaits you
commit the error and opens the car door or breaks window glass to commit the theft.

7.26.7. Tea with sleeping chemicals
You are smart enough not to leave the valuables unattended while you are in a bus. The
cheat may befriend you. You go to take tea in a stall. The cheat brings you tea after
pouring chemical in the tea to make you sleep after some time. You get up in the morning
and notice that you are at the farthest destination of the bus or you are sleeping alone in
the bus without your valuables.

In another variant, the cheat may come up to your hotel and stay in the same hotel having
become your friend in the journey. The cheat finally offers you something to drink or eat
food laced with chemicals. You sleep in the hotel for a day or two and finally find
yourself without your valuables or money, even to pay hotel bill.
7.26.8 bus closed after getting down to deceive you

You believe in the good bus conductor who locks the bus after every one gets down and
you leave the brief case containing valuables in the bus. You go to take refreshment and
return to find the brief case missing. The bus conductor is not responsible for your
valuables. You have left your goods unattended at your own risk in the bus.







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7.26.9. Criminals spot some one with valuables and cheat him

The number of gangs operating in trains and buses cheating people with laddu or peda or
biscuit or prasad laced with chemicals is regular feature. These gangs are operating with
gang members in a particular area for years together. You may be travelling in their area
once in a while but they travel everyday with monthly passes as their investment. They
detect a new passenger who is over watchful of his belongings containing valuables are
their target. Once target has been identified you do not have a way out. If one cannot
cheat you, the next gang buys you by paying small consideration to the out gong gang, to
finally cheat you.

7.26.10. Force you to have sleep using chloroform

You may be some one smart who is well versed with all these styles of cheating. At night
time you tend to relax a little bit and you find chloroform in mild dose near your nose and
you get a sound sleep. The man who walks down with your bag or suit case or brief case
at night may be having even a female partner on whom even the police would not doubt.


Under jewellers block insurance policy, claims can be of huge amount even to the extent
of completely empting the shop of gold stock worth a crore or more. But the first hurdle
is with the police or the court. Unless they issue final report, the claim cannot be settled
by insurance companies. Though there is provision of part payment in insurance parlance
but the claim has been recommended by the insurance surveyor and admission of liability
by the insurance company. All these process can take substantial amount of time. In the
mean time the bank would not stop charging you interest. You may not have enough
capital to restart the business. In such circumstances it is better to guard your stock from
losses. Taking insurance claims is a painful process unless you have enough capital to
support you even after the loss. So it is better to be aware to safe guard your assets to the
best of your capability. No doubt taking insurance claim is undoubtedly no one would
cherish at any cost.

7.26.11 Hypnotise you to cheat
This is an age old trick for cheating by white collar non criminal minded people. They do
not hurt/injure you in course of cheating. Their approach would be sophisticated and
friendly to win your confidence. Unwittingly you give your consent to the cheat and
become a willing victim till you realise that you have been cheated. It takes some time
before you come to your senses and realise that you were hypnotised and cheated by
someone. The style of cheating can be as follows:-
A) You come out of your bank after collecting jewellery in your purse or bag. You are a
middle aged lady and walking back to your home while worrying about worldly things.
You are approached by a sophisticated person who claims himself to be a famous
astrologer. He tells the lady that she has a son whose life is in danger at this particular
moment of time because of bad position of staRs. Her sons life can end in an accident.
This has to happen unless she wants to save his life. He asks her whether money is more
important or life of her son. Naturally for a mother life of her son is more important.
Then she reveals that she is financially well off and some more family secrets. Any
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mother would like to save her sons life and in this way she gives consent by falling in his
trap. The man says that she has to remove all metal from her possession for sometime
while he prays for safety of her sons life. The lady takes out all jewellery including ring,
bangles and jewellery taken out from bank in a white handkerchief offered by the person.
The man asks her to close her eyes for a minute and tells her to hand over the metal in the
handkerchief to him. He assured her that by removing metal her son would be saved. In
a few seconds he vanishes leaving the lady praying to god. After a few minutes the lady
reaches home. She talks to family members and finds that her son is safe. She finally
discovers that she was cheated by the so called astrologer.

The same cheating method can be applied in broad day light and in a busy market in any
shop or in house. Once who let the person inside the premises and let him talk to you,
you are hypnotised and finally cheated of cash or jewellery whatever you can surrender
immediately for well being of your son / daughter / husband. The victim can be a mother
or father or wife. The entry is friendly and exit is equally friendly. In case of small loss
you may be embarrassed to reveal your foolishness. In case of big loss everybody comes
to know of it.
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Chapter 8

8. All Risk House Hold Insurance Policy

This is one insurance policy which should be taken by all house hold without fail. We all
care for our home, jewellery, electronic items, house hold items which accumulates over
a period of time with our hard earned money. What if the same is lost in flood, fire,
burglary, lost in transit, earth quake takes place. All these risks call for suitable insurance
policy so that in case of loss one is in a position to knock on the doors of insurance
companies.

There are two house holds of Mr Sharma and Mr. Verma. Due to fire, both their houses
got burnt. Mr. Sharma had taken insurance policy that covered his building and he
immediately lodged insurance claim. Timely help was rendered by the insurance
company though he did not have any financially sound friend or relative to help him.
Insurance company turned out to be his god sent saviour.

But Mr. Verma did not have any insurance policy covering his house and he did not have
any one to fall back upon at this time of need. Though he had many friends but all turned
him down.

In our country we do not have social security. You may be paying lacs of rupees as
income tax, but should you become poor or bankrupt due to any reasons what so ever, no
help can be expected from the income tax department or government. That so why the
first thing we do is to make a house to cover your family and then have jewellery for a
bad day or for your childrens marriage or for old age. Taking insurance policy for these
valuables is very important so that your hard money does not get snatched from you by
natural or man made calamities.

Jewellery loss is covered even in case of loss due to misfortune and any where in India.
E.g. Mr. Verma lives in Delhi but the loss took place when he was in Chennai while the
family was attending a marriage ceremony. Even such loss would be covered in the all
risk house hold policy.
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Jewellery can be insured by husband and loss can be caused by wife. Jewellery should
not be left unattended, other wise the claim is not admissible. E.g. Mr and Mrs Batra
goes to attend a marriage and at the end of the ceremony they pack their jewellery in a
pouch and kept on a chair. In the mean time some one urgently called them and they
leave forgetting the jewellery on the chair. After some time they realise that they had
forgotten the jewellery on the chair and find it missing. Such claims may not be covered
in the policy.

This is all risk policy for house holds, covering various risks. Loss due to theft without
forcible entry is also covered in the policy. Loss by misfortune for jewellery and
valuables is covered against all risk including for misfortune any where in India. But one
must care for following:-

Proper declaration must be given for jewellery with description / bill / valuation report /
rate / weight / value.
Cash is not covered in the policy unless declared.
As and when new jewellery is added in family, bill or valuation report must be sent to
insurance company for coverage in insurance policy by paying extra premium.
In house hold items what is sought to be covered must be clearly mentioned together with
details of furniture, fixtures and fittings, clothes, t.v., fridge, micro oven, CD player, PC,
work of art, house hold appliances, carpets, etc. Details can be made room wise for the
whole house one by one, as well as photographed digitally. Description like item,
quantity, price, store, purchase date may be noted. In case of work of art and other items
without purchase bill or items whose value has substantially changed, separate valuation
report may be taken for proper insurance cover.
The policy holder may take photo graphs, video, digital photo may be taken of the house
hold items including jewellery insured. One can create these additional evidences which
cannot be captured on documents. Video or still photo graph can further support your
claim in case of fire or burglary. The digital photo graphs may be stored in computer in
office as well as at home or in pen drive or on CD. Even the documents can be scanned
and store.

In case of expensive items like camera / computers / laptop etc. Proper bill / valuation
report / serial number / model / make / year / quantity / rate / value must be provided with
proper configuration to insurance company.
Individual items cannot exceed 5% of sum insured unless separately covered. E.g. If
insurance policy has been taken for Rs. 1,00,000.00 in that case no item can exceed rs,
5,000.00. A camera costing say Rs. 15,000.00 cannot be covered unless separately
insured and declared.
Theft from unattended car is not covered in the policy.
E.g. You have gone to the market leaving you laptop in the car and the laptop is stolen.
Such losses from unattended vehicle is not covered in the policy.
Unless specifically covered, jewellery is not covered in the policy. You have to give a
separate list mentioning item- weight- purity -rate -value of each item of jewellery
intended to be insured.


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8.1. Rate of gold jewellery

Weight of gold jewellery does not change over the period, the same list can be used for
insurance after including recent acquisitions of new jewellery. But gold rate keeps on
changing from time to time. Two- three years back rate of gold was about Rs. 5,000.00
per 10 gram and now in 2008 march it is say Rs. 12,000.00 per 10 gram. In such a case,
suitable increase in sum insured is very necessary from year to year. Should you take sum
insured on the higher side but rate of gold has gone down, in such a case due to claim,
lesser amount being present market rate may be considered for assessment of loss. It is
always better to take higher sum insured in place of lesser sum insured.


8.2. All risk cover for jewellery in house hold policy.

In case of house hold policy, all risk cover is available to jewellery and valuables against
loss caused by misfortune as well as theft, whilst any where in India. Conditions of
average clause are not applicable in such cases. Loss is restricted to the sum insured set
against such item in the schedule. Coverage for jewellery is against agreed value.

8.3. Valuation report

In case of jewellery, one does not often take jewellery bills from shops. He may have
received jewellery during marriage from parents / in laws. Being small tax payer one is
not required to file wealth tax return containing details of jewellery. In family jewellery is
most vital for financial safety / security. Utmost care should be taken to insure them.

Typical claim during marriages is falling of necklace from neck of wife during marriage
and not finding the same. In such cases filing of missing jewellery report is necessary
with the police. Statement of incidence has to be given by insured. Route map and
marriage card is required. Video clipping or witness may be taken to ensure the lady was
wearing the said neck lace. Income tax return, nature of business, bank statement in proof
of financial sound ness may be obtained by surveyor.


In case of house hold jewellery, under insurance is not applicable since insurance is done
on the basis of jewellery value declaration.

An affidavit duly notarised of all jewellery may be given to the insurance surveyor
detailing the lost jewellery:-
Item -weight - rate value how acquired- year of acquisition- lost or saved.
The balance saved jewellery not stolen may be produced for verification to the surveyor.
Verification may be made by the surveyor from the balance saved jewellery whether any
of the lost jewellery is with the policy holder or not. Bank locker of the insured may be
visited to verify if the insured has any saved jewellery in it. When was the locker last
opened by the insured may be verified to ensure it was not operated immediately after the
loss.

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In case of a claim / loss, one often makes mistake about description of item / weight / rate
/ value of jewellery lost. This results problem in settlement of claim. One may call a kada
as kangan or churi or bracelet and in insurance policy it is mentioned as bangle, while in
F.I.R. It is mentioned as kada and in fact it is a kangan. The local dialect may change
from place to place for various jewellery items.

Moreover, in policy the weight is say 10.5 grams for a kada but in F.I.R. The weight of
the kada is mentioned as 15 grams. But actually it weighs 12 grams. The purity as per
claim form is 23 carats and 22 carats as per policy and 20 carat as per F.I.R.

In such cases, claims settlement of household jewellery becomes a problem for both
policy holder and insurer. Valuation report may be taken from the jeweller for insurance
purpose mentioning exact name / weight / rate / purity / value. There are many jewellers
in every town who are authorised valuer as per income tax act and their services may be
availed for such purpose. The valuation report may not cost more than 0.5% of the
valuation done. A copy of valuation report may be given to the insurance company at the
time of taking insurance policy.

In F.I.R. / claim form same description of item / weight may be mentioned so as not to
create confusion.

In case of subsequent purchase of jewellery immediately information may be given to the
insurance company with proper bill / valuation report for coverage by paying additional
premium.

Though as per insurance companies the declared item / value is final and can be insured,
the claim settled but what about confusion / discrepancy created by insured himself
resulting rejection of the claim or less claim settled.

In case of a claim, insured will have to produce relevant records / papers as asked in
support of the claimed item to the satisfaction of surveyor / insurance company.

8.4. Papers required in case of claim related to house hold policy.

How the loss took place/when it was discovered/how the burglars entered into the
premises./exact room and almirah from where the items were stolen/ where was the
occupants at the time of burglary?

Purchase bills of items lost. Valuation certificate of gold jewellery and silver items.

Purchase bill of stolen items helps in deriving the cost of items stolen. In case of
jewellery if there is no bill/or if they were gifted by some one, in that case earlier
valuation certificate or affidavit may be provided to the surveyor.

Item/weight/quantity/value of saved item.

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The first thing the surveyor would do is, stock taking of saved items lying with the
insured. List of saved items must be made and tallied with list of items covered under the
policy.

Copy of F.I.R/final police report.

Detail of items lost.

8.5. Regarding gold jewellery and silver items: -

Item/year of purchase/quantity/weight/value/amount of loss/purchase bill. The rate
declared in the insurance policy is accepted unless rate has gone down in the meantime.
8.6. Regarding loss of crockery and garments: -

Item/ year of purchase /quantity/ value/ amount of loss/ purchase bill. Random market
enquiry about value can be made in the absence of purchase bills. Depreciation may be
applied in such cases to arrive present value keeping in view life of the item stolen.
Depreciation can be as high as 50% in case of house hold items.

Copy of income tax return of last three years.
Copy of income tax return shows financial position of the insured.


Statement of neighbours / servant about the loss.
Statement about the loss may be taken from the neighbours, servant to verify genuineness
of the claim.

Detail of bank lockeRs. Since when last operated before burglary and after burglary.
Certificate from bank regarding operation of bank locker. Detail of saved items in the
locker.


8.7. Small electronic safe in houses

These days most house holds avoid using even godrej almirah for storage of valuables.
They keep them in wooden wardrobe/drawers which are not safe from any angle.
Though there is no such condition in the insurance policy to keep valuables in safe or
otherwise. Valuables can be stored in electronic safe which are easily available for Rs.
5000.00 to Rs. 10,000.00. These safes are burglary proof and will become much stronger
if fixed in the floor or wall.


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Chapter 9

9. Other important insurance policies

9.1. Loss due to LPG cylinder explosion
Under fire clause loss due to explosion in LPG cylinder are covered in the house hold
policy. Similarly it may be noted the LPG gas companies e.g. I.O.C., H.PCL., B.P. Also
takes insurance policy covering loss to domestic consumers due to leakage and explosion
provided they use I.S.I. Mark pipes for LPG gas regulator. Claim can be lodged for loss
of life, medical treatment by registered users at their registered premises as per records of
LPG dealer.

9.2. Separate building policy for earth quake long term
We do not have social security in our country. Our house or flat is our sole financial
security for a bad day. In case of house / flats / bungalows suitable cover should be taken
in view of last bad experience of earth quake in Ahmedabad. In case of earthquake one
becomes homeless. If he is in a high rise building, then he is at a bigger loss since he is
nowhere because he does not own any land.

Building can also be insured under house hold or shop keepers policy. How ever
insurance policy has to be taken every year.

Insurance companies also offer long term insurance policy up to 10 years single policy
against one time premium payment by allowing 50% discount or 5% value increase every
year. To take care of escalation in construction cost, one can forgo discount and let the
value increase by 5% every year. As a result the building will not be under insured. One
need not to renew policy every year. Normally insurance companies do not issue long
term policies of more than one year term but this one is an exception. However, one must
take care of following:-
One must obtain 64 VB certificate of payment of premium immediately after issue of
policy, since 10 years is too long a period to retain premium payment proof by insurance
companies. While settling a claim they have to ensure that premium had been collected
and bank statement or other necessary papers are checked and then only the claim is
settled. After checking relevant records certificate of proof of payment of insurance
premium is issued u/s 64 vb.

Only value of super construction is insured in case of a building and not value of land.
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9.3. Loan linked insurance policy for borrowers from bank.

Many individuals take bank loan, housing loan, personal loan and invest in business /
shares / properties. Sometime they take loan for personal needs of various nature
including marriage loans, educational loan by offering properties as collateral securities
or on the basis of personal guarantee. What if the borrower has a fatal accident and he
cannot effectively earn or he dies and the family is not in a position to pay back the loan
outstanding and they land up in a big financial crisis. In case loan instalment not paid by
the surviving family members, the lending bank will simply take over the mortgaged
property and leave the family home less. Even after death, no one would desire such
consequences to his family.

In such cases it is better to take loan linked policy. The benefit of such a policy is that the
insurance company will directly settle the loan amount of the bank should a claim arise.
One need not face financial crises to repay bank loan if he has taken loan link policy.
Normally the bank and insurance companies both are run by the same institution like SBI
v/s SBI life, ICICI v/s ICICI Lombard etc. As time passes the loan amount reduces, so
does the assured amount. In the event of loan having been fully paid, nothing is paid to
the survivor borroweRs. The ease of settlement of borrowed amount is the beauty of the
insurance policy, in case of a claim, without endless formalities. The claim is settled even
if the borrower has natural death or accidental death.

The insurance premium can be paid by the borrower separately. Otherwise the borrower
may request for increase in loan amount by the amount of insurance premium of the total
policy period and let the EMI increase accordingly. For example against loan of say Rs.
50.00 lacs there may be instalment of say Rs. 50,000.00 per month over a period of say
20 years and additional say one time payment of Rs. 5.00 lacs may be made for loan
linked insurance policy that may increase the E.M.I. By another Rs. 5,000.00. Thus the
borrower may have to pay Rs. 55,000.00 as E.M.I. to the bank. At the end of say 5th year,
if he was to die in a road accident or by natural death due to say heart attack, his family
can be relieved of the botheration to pay further E.M.I. of Rs. 55,000.00 p.m. On the
outstanding loan of say Rs. 40.00 lacs. After death of the borrower, naturally the income
of the family would substantially reduce and the P.F., Gratuity etc. Of even Rs. 30.00 lacs
may not be enough to settle the outstanding loan of Rs. 40.00 lacs bank loan. These
policies do not need to be renewed yearly, once option has been made to increase loan /
E.M.I. Amount. In this way lending banks can reduce non performing assets and also
avoid litigation and unnecessary recovery actions. The borrower can also give financial
security to the surviving family members by of his foresighted actions.

9.4. Personal accident (p.a.) Policy

These days the very basic purpose of life insurance policy is defeated in view of high cost
of education / housing. The cost of average house of three bed-rooms is not less than Rs.
50.00 lakhs. Higher education cost anything between Rs. 20 30 lakhs.

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The premium of a Rs. 50.00 lakhs p.a. Policy is about Rs. 5000.00 per annum. Should an
individual suffer accidental death, his family at least gets Rs. 50.00 lakhs. The premium
is very less and affordable. In case of accidental death, his family is financially secure.

The cost of a similar insurance policy under life insurance policy is prohibitively
expensive. About Rs. 5,000.00 is the premium annually for a life insurance policy for 10
years of sum insured of Rs. 50,000.00. In case of death Rs. 50,000.00 from life insurance
is too small a figure in the face of P.A. Policy of Rs. 50.00 lakhs.

Even if you are to insure your self under life insurance for Rs. 10.00 lacs and pay say Rs.
50,000.00 Rs. As insurance premium for a period of 20 years, the sum assured is not
enough to buy even a L.I.G. Flat of one bed room these days in a city. Life insurance
policies are good for investment and better if you survive to take maturity amount. While
in case of accidental death you need personal accident policy to protect your family after
you are no more in this world.

On the other side p.a. Policy of Rs. 1.00 crore costs about Rs. 10,000.00 would be boon
for the family should accidental death take place. There would be enough money for the
whole family to educate kids costing Rs. 20.00 lacs, buying a house for Rs. 50 lacs,
putting Rs. 30.00 lacs in bank earning
10 % interest p.a. (Rs. 25,000.00 p.m.). What if you survive and no accidental death takes
place in that be happy with your family.

These days highly educated I.T. Employees, Engineers, C.A., Bank Employees,
successful business men earn approx. 1.00 lacs p.m. Which is much more than their
family needs but their life is on fast track on good cars, overseas tours. Such people do
need such P.A. Policy.

Road accidents in car are common and the whole life gets upset. So protect your family
by p.a. Policy. You will be surprised to know that there were about 1.30 lakhs of people
who died in road accidents in India during the year 2007 and this figure is highest in the
world, even more than road accident deaths in china who was once holding this record.
The coverage is valid all over world unless restricted in the insurance policy. Inform
insurance company of any change in profession or business of insured. At the time of
renewal inform whether any infirmity or disease has taken place since last policy.
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9.5. Documents and investigations required in case of p.a. Claim

1. Insurance policy copy. Since when the policy had been taken. Copies of earlier year
police. Coverage taken.
2. Terms and condition to the policy.
3. Proposal form. The insurance has been accepted as per proposal form and any
misstatement in it may render the policy ineffective.
4. There is provision of nominee in the proposal form itself so as to facilitate the policy
holder in case of any claim.
5. Claim intimation letter detailing the time, date, place of accident to insurance
company along with policy no. Inform insurance company before cremation unless
reasonable cause is shown.
6. Claim form duly filled in has to be submitted to insurance company.
7. Is the cause of death covered in the insurance policy? Attention has to be paid to the
exclusions mentioned and terms and conditions which will be minutely dissected and
analysed by the investigator and insurance company. Was the insured intoxicated or
poisoned at the time of death. Could it be a case of suicide? Is it a case of death due to
negligence of insured?
8. Medical report/ post mortem report/
Death certificate. In case of death in hospital, was the accident major cause of death.
9. Police F.I.R. In case of accidental death / panch nama copy. Place and cause of death
as per police report.
10. Heirs of the insured with proof/ affidavit
11. Viscera report in case of accidental death. It may take a few month before this report
is received. Viscera report confirms what was in the stomach and intestines of the
insured at the time of death. Existence of drug, alcohol or poison is ruled out in this
report only.
12. Map of the site where accident took place.
13. Statement of witness of the incident.
14. Relevant documents concerning the insured e.g. Date of birth certificate, school
leaving certificate, photo, income tax return of last three years, bank statement,
nature of business, driving licence, pan card, election card etc.
15. At the time of accident who was with the insured and his statement?
16. Was the insured heavily indebted or involved in gambling, speculation etc. Financial
status of the insured including property, bank balance, shares etc.
17. Route taken by the insured at the time of death. Was the insured coming from a party
at night? Did he have any animosity with any one? Was some one interested or
benefited due to his death.
18. Was the insured suffering from epilepsy or any mental disease.
19. Did the insured have any credit card or life insurance policy covering personal
accident.
20. Investigator is appointed by the insurance company to find out coverage in the policy.
Investigator would visit the site of loss to find out what had happened and meet
nearby people including police for evidence. The papers and documents may vary
from case to case. The investigator has to be satisfied about the incident and coverage
before he submits his report.

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9.6. Exclusions to the p.a. Policy
1. Loss due to suicide is not covered in the policy
2. Under the influence of drug, alcohol at the time of death.
3. Participation in civil riot etc. At the time of death or accident.
4. Participation in any dangerous sports like para gliding, motor racing, scuba diving
etc. Causing death or accident.
5. In the case of misstatement of age the policy runs into trouble.
6. Learning to operate an aircraft.
7. Coverage has been given subject to exception for which insured is self
insurer.
8. Breach of law causing death or accident with criminal intent.


9.7. Pre existing disease in mediclaim policy

This policy is best taken when you are disease free. It is always better to take insurance
policy with the same company so that pre existing diseases starts getting covered in the
policy. E.g. In 1
st
year say cataract or hernia surgery is not covered. But after 4
th
year all
pre existing diseases gets covered. In the terms and condition one can find mention of
disease not covered for certain number of years.
As per new guide lines by I.R.D.A. Pre existing disease is any ailment or injury or related
condition for which you had sign or symptom and were diagnosed or received medical
attention or advise or treatment within 48 months prior to your first mediclaim policy.
In case of timely renewal of policy and contracting a new disease during policy period,
then such disease cannot be excluded.
If timely renewal is done, then there is no need of medical check up for renewal. Gap in
the policy renewal is always treated as new policy.

Coverage of pre existing disease is covered in the mediclaim policy after four years of
continuous policy having been taken. The onus is on the insured to prove that he had
taken regular insurance policy for over four years. What if insurance company denies the
claim for alleged pre existing disease, the insured dies afterwards and the family also
does not have proof that they had taken regular mediclaim policy for over four years.
In such cases it is always better to keep either policy copies or policy number and policy
period at least for four years as evidence.

9.8. Name difference in mediclaim policy

In case of mediclaim policy, say in Gujarat as per medical records Anil Bhai had fallen
sick and was covered under treatment. While as per mediclaim policy it was Anil Kumar
Gajera. This creates problem in settlement of claim process by insurance company. As
such adequate precaution should be taken to mention proper name of insured in hospital
records if mediclaim policy has been taken else claim settlement may be a problem.

Meera Ben may be in mediclaim policy as Meera Rawat.
Mina ben may be in mediclaim policy as Meena Lal.
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Coverage of family members like son or daughter in the mediclaim policy.
It is normally under stood that dependent unmarried son or daughter can be included in
the mediclaim insurance policy apart from wife. How ever the definition of dependent is
very different in the eyes of the insurance companies for the purpose of mediclaim
policy. The definition is not a problem so long as your children are young and studying in
school. Problem starts college and onwards.

In case of unmarried daughter
In case of a daughter, she can be termed as dependent so long as she is not married.

What if she starts earning more than Rs. 1500.00 p.m.? While she is not married and still
studying in college. She is no more dependent and cannot be part of your dependent
family member in the mediclaim policy. Even if you have paid insurance premium and
there is a medical claim, it may be turned down.

Even if your daughter is not studying and is unmarried, she can be termed as dependent
for the purpose of benefit under mediclaim policy. .
The moment your daughter is married, she cannot be termed as dependent on you.

In case of son
At any age, if your son is earning more than Rs. 1500.00 then he cannot be termed as
dependent on you.
So far as marries is concerned, he is not dependent on you, the moment he is married.
Between the ages 21 to 25 your son is dependent on you for the purpose of mediclaim
policy only if he is taking full time study course.
It means, if he is not taking any full time course, then he is not dependent on you, even if
he is without a job.
If he is more than 25 years of age then in no case he can be termed as dependent even if
he is taking full time study course.

9.9. Age in case of mediclaim policies

In case of mediclaim policies age should be properly declared.
E.g. your age is 18-5-1957 and as on the date of renewal of your medical policy on 18-4-
2008 your age is 50 years and 11 months. For a family of total four persons, your
insurance premium comes to say Rs. 18,000.00 if you age is shown as 50 years.
Insurance premium is charged on the basis of highest aged family member. The insurance
agent/ development obliges you to charge less premium by showing your age as 50 years
in the computer and accordingly create renewal premium notice. At this juncture i asked
my agent to reconfirm that the age calculation was correct since 50 years and 11 months
cannot be taken as 50 but it should be closer to 51 years. The agent said that he is helping
me by charging less premium, whereas actually my age should be 51 years as per actual
calculation. Even one day more than 50 years would attract insurance premium on age of
51 years and the premium would be say Rs. 20,000.00. In the event of a claim, the
insurance company may repudiate my claim saying that I have understated my age and
thus cheated the insurance company. They would do the most obvious either charge
balance premium or reject my claim. I opted to pay medical renewal insurance premium
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of Rs. 20,000.00 on my age of 51 years and not break the bond of trust. If the actual age
requires medical examination selection procedure for entry into the scheme, then the
claim is rejected if wrong age is declared.

9.10. Approval of limit by TPA in case of hospitalisation


These days insurance companies issue cash less mediclaim insurance policy and the third
party administrator (TPA) manages approval, processing of the mediclaim claim, what
was so far being done by the insurance company? The TPA is manned by experienced
doctors and administration staff. It is better to know your TPA while taking mediclaim
insurance policy and their working style in advance. Carry your cash less medical identity
card and insurance policy in case of emergency visit to hospital for treatment. It may be
noted that car accident claim and medical claim are some what similar.

Once you visit the hospital for treatment, the doctor would provide you estimate of
expenditure. The same has to be sent to the TPA who would approve limit depending on
your insurance policy and the disease to be treated. It has been noticed that the hospital
doctor may give higher estimate and the TPA may approve less. Awaiting approval, the
hospital may also take some advance deposit from the insured. E.g. Estimate for an
operation may be Rs. 70,000.00 and the approval may have come for Rs. 50,000.00. The
hospital may take advance deposit of Rs. 20,000.00 to cover balance amount of estimate
made by them.

The TPA gives approval after considering sum insured, nature of disease, whether treated
for pre existing disease, type of hospital where treated, whether on approved panel or not,
room rent eligibility etc. Normally it takes few hours or a day to get an approval from the
TPA. It may take longer hours for approval at night time when skeleton staff may be
present in the TPA.

The balance amount over and above approval made has to be separately claimed from the
insurance company.

In case treatment is taken from unapproved hospital, all payments have to be borne by the
insured and separately claimed from the insurance company. In case treatment in small
cities, care has to be taken that the hospital is govt. Registered. Immediately inform the
TPA about treatment taken for the purpose of claim intimation.

In case of planned hospitalisation one can visit the hospital say for hernia, heart surgery,
cataract etc. And obtain estimate of treatment. Pre authorisation form may be filled and
sent to the TPA in advance by the hospital 3-4 days before hospitalisation. The TPA may
send approval or rejection or ask for additional information from the hospital. Finally
authorisation may be given to hospital depending on benefits payable under the policy. In
case approval does not come due one reason or the other, one will have spend on his own
and claim later on from the insurance company.

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One must study the insurance policy and its terms and conditions before opting for room
rent in hospital. There are restrictions on the room rent. After quoting policy number one
can discuss with the tpa about eligibility of room rent. Normally room rent per day is
allowed up to 1% of sum insured subject to maximum of Rs. 5,000.00 which ever is less.
In case of I.C.U. Not exceeding 2% of sum insured or Rs. 10,000.00 per day which ever
is less. For example in case of Rs. 1.00 lac sum insured one may be eligible for maximum
Rs. 1,000.00 per day room rent. If one opts for higher room rent, the balance has to be
borne by the insured.

In case of rejection to give approval, reason is communicated by the TPA.

Some companies have started defining zones for mediclaim policies. Mumbai is in zone
1, Delhi is in zone 2 and rest of India is in zone 3. If some one jumps zone to take say
better treatment, he will have to be satisfied with settlement of claim less by 10 to 20 %.

After 60 years of age no enhancement in sum insured is allowed. After 70 years of age
insured may be loaded by say 2.5 % of applicable premium.

9.11 advantages of taking mediclaim policy in groups

By way of taking mediclaim policy in groups say at company level or at association level
one can avail of many benefits which are otherwise not available to individual mediclaim
policy. Bargaining capacity of the policy holder increases at group level, since single
cheque of bigger amount is collected by insurance companies at one go with lesser
efforts. The bargaining capacity would be much better if insurance by the company for
fire, burglary etc. Are also taken from the same insurance company. Maternity benefit,
not allowed in individual policies, may be allowed for younger staff in the group. Initial
gap of 30 days for first claim may also be waived. For senior staff, higher sum insured
may also be allowed. Some insurance companies also allow parents, children, spouse in
the definition of dependent members in the mediclaim policy. In case of change of job
some insurance companies may also allow conversion to individual policy after some
period of working with the old employer. This conversion can be very useful when you
are approaching retirement and no company would be ready to issue you medical policy
at this old age. At company level one must take care to inform the insurance company
about new staff who join the company and pay additional premium by covering them in
mediclaim policy.





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Chapter 10

10. Car insurance claims

Being a C.A. I have never handled car insurance claims but I was on the other side of the
table being a policy holder and all my experience was as a policy holder and not as a
surveyor.

In our country the highest selling insurance policy is of car. One cannot drive a vehicle
without proper insurance policy. At least one must have third party policy and carry
certificate of insurance in the car is legal requirement. But scanty regard is given to the
insurance policy by policy holders.

For a small claim also doors of insurance company are knocked, surveyor called, estimate
made, scrap deposited, claim formalities fulfilled, claim cheque collected. Cash less
insurance claims are also made.

I am insurance surveyor and have a car for last 16 years but could never take a insurance
claim in spite of having insurance policy and many accidents to my credit. The following
are my observations:-

A. Car dickey or bonnet or door hit by another vehicle resulting damage.
- denting / painting cost Rs. 700.00.

- if damaged item was to be changed, it costs say Rs. 12,000.00. Less depreciation
say Rs. 3000.00 = net claim Rs. 9000.00.

Thus I have to pay Rs. 3,000.00 for the new door and insurance company will pay Rs.
9,000.00 after depreciation.

Thus which is cheaper mode Rs. 3,000.00 or Rs. 700.00 for me to bear?

Obviously I can simply pay Rs. 700.00 and get the denting and painting done and
continue to enjoy no claim bonus as well.

These are some of the usual accidents in city roads. The car service company would
advice lodging of insurance claim but for an average person the loss is more if claim is
lodged and cheaper if he goes in for denting / painting without lodging insurance claim.
Remember city roads are very much prone to small accidents every day, due to your own
fault or fault of others. Your car can rarely be without dent.


Now, over the years my car insurance policy has 65% no claim bonus. I can transfer the
policy to a new car by me and avail huge benefit.

In a new car say insurance premium Rs. 20,000.00
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Less 65% no claim bonus Rs. 13,000.00

Pay for insurance of new car Rs. 7,000.00

Thus every year I can make savings of Rs. 13,000.00 for no claim bonus.

Thus I saved huge amount of time by not visiting insurance companies. The real gainer is
the car servicing company who make money at the cost of insurance companies and
innocent car owners.

10.1. Car theft cases

Another case to point one car was parked next to mine and my car was found with
doors opened but not stolen. The car next to mine was found missing and stolen. I had
opted for gear lock which is difficult to break / cut. The second car had a remote
electronic anti theft lock, even then the car was found stolen. Not to talk of a car getting
easily stolen without any anti theft device. It is really time consuming and resulting
financial hardship if a car is found stolen. Numerous visits to police / insurance
companies for months together till untraced report is received from police and the claim
settled. Even then mind it you do not get 100% even if it is a brand new car, you are
insured only for 95% of the value. What if the car is old and then you have to bear
depreciation portion or loss of value as per similar car in the second hand market. In the
meantime you will have to continue to pay car instalment to bank if you have taken car
loan else pay penal interest to bank for instalment default. Worst of all if the stolen car is
recovered and thief caught, you get it back from the police through the court after you
have fulfilled formalities to take the car on superdari and cannot sell the car till court case
is settled.

10.2. Insured declared value (I.D.V.)

In case of car insurance IDV is basis of settlement of claim in case of total loss. At the
time of insurance you can bargain for better IDV for your car and accordingly pay higher
insurance premium for your well maintained car. Once the value is accepted and
insurance premium accepted, then the insurance company cannot settle the claim for
lesser amount in case of total loss. To give an example,

1-1-2007 New car cost Rs. 10.00 lacs
Car insurance will be done at 95% value Rs. 9.50 lacs.
Say insurance premium comes to Rs. 30,000.00
0n 1-1-2008 the car can be insured for Rs. 9.00 lacs after deducting 10 % depreciation.
Insurance premium comes to Rs. 27,000.00.
- But the insurance agent applies 20% depreciation and offers to insure the car for Rs.
8.00 lacs and charge insurance premium of Rs. 24,000.00.

This is the time to argue for better idv and pay higher insurance premium of Rs. 27,00.00
on idv of Rs. 9.00 lacs. As per the insurance agent you may be fool to offer more
insurance premium while he is ready to insure the same car for lesser insurance premium.
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Should there be total loss say due to theft, you will be a bigger fool to receive Rs. 8.00
lacs in place of Rs. 9.00 lacs. In effect you loose Rs. 1.00 lacs by saving Rs. 3,000.00
premium on idv of Rs. 8.00 lacs. So at the time of insurance renewal spend a few minutes
with your insurance agent and check whether you are being penny wise and pound
foolish.

Period deduction in value
New insurance 5%
Ist renewal 15%
2 nd renewal 20%
3 rd renewal 30%
4 th renewal 40%
5 th renewal 50%

After wards follow auto valuation book.

However in case of repairing charges exceeding 75% of IDV, then it would be treated as
a case of total loss. This may happen in case of flood loss, fire loss or damage to an
imported car whose parts are not easily available in India.


10.3. Very little car protection from theft

These days it is next to impossible to save a car in case the thief wants to steal it. One
thief asked for car key from a car owner while the owner was driving it. The car owner
was made to stop the car and shot, on showing resistance to hand over the car key.

Theft of cars with electronic anti theft system are common cases. You have a gear lock in
your car but you go to a shop without locking the gear lock for a minute only to find the
car stolen within a minute. You see some one fiddling with your car and by the time you
reach the car, its gone for ever. You have to be one step ahead of the thieves. Install
GPRS system in your car to find out location of the car in case it is stolen. Install car
engine jamming system in case some one tries to open it with duplicate key. Finally
your best protection is to have a suitable insurance policy covering proper value of the
car.












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10.4. Additional car cover

Death or injury to un named private car occupants including car owner are not
automatically covered even in the comprehensive car insurance. Only vehicle driver is
covered in the comprehensive insurance policy.

Coverage is normally taken by the car owner for the damages to the car and not for the
occupants.

In case of comprehensive car insurance policy, one can take coverage of maximum four
unnamed car occupants or more depending on car seating capacity at a premium of say
Rs. 100.00 for Rs. 2.00 lacs each for any accident resulting injury or death.

Injury or deaths to third party during accident are automatically covered even in the third
party car insurance policy but car occupants are not covered in such a case of accident.

One should normally take individual personal accident insurance policy to cover risk of
accidental death or injury in any thing including INA car or aeroplane or ship or on the
road etc.

Next time, be aware that you are taking ride in some ones car at your own risk and in
case of accidental death or injury you are usually not covered in the car insurance policy.
To avoid such risk, take individual p.a. Insurance policy.

In case of use of two wheeler vehicles, there is no insurance coverage to the pillion rider
or rider on account of accidental death or injury if one uses scooter of say Employer
Company owned or scooter of his friend.

The accessories of the car should also be properly insured.

In case of CNG / LPG kit fitted in a car, one must get it endorsed on the registration
certificate (R.C.) Else the insurance company can reject the claim due to fire or accident
since they had insured original petrol or diesel car and not CNG or LPG car.

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10.5. Regarding car insurance and sale of car

Car insurance policy is issued to the owner and one can transfer the same to a new car
bought while selling the old car. The old insurance policy is an asset in the hands of the
owner. No claim bonus can be carried indefinitely.

Sometimes the car policy holder has not lodged any insurance claims in the last few
years. He is eligible for no claim bonus. At the time of sale of old car he can retain the no
claim bonus and take the benefit of no claim at the time of taking insurance policy for his
new car. He has to give a letter to the insurance company that he is selling his old car and
the insurance policy for the balance policy period may be transferred to the new owner
and that he intends to retain no claim bonus. He can use no claim bonus in a period of
three years. In this way the insurance company is relieved that the old owner has sold his
car legally. As an evidence of sale, the insurance company may take copy of form no. 29
/ form no. 30, copy of registration certificate (R.C.), delivery slip, old certificate of
insurance, and proposal form by new owner. The car under sale has to be brought to the
insurance company for inspection and tracing of chassis and engine number. After all the
formalities the insurance company will issue new insurance policy in the name of new
owner and no claim bonus certificate in the name of previous owner.

As of now in case of even a single claim whole of no claim bonus is withdrawn. No claim
bonus is now restricted to 50% in new cases.

In case of car insurance policy is renewed within policy period then no claim bonus is
automatically transferred to new policy. In case of renewal of car insurance policy after
expiry, in that case car has to be compulsorily inspected by insurance company and no
claim bonus is also allowed if policy is renewed within three months of expiry of policy.
In case of renewal of car insurance policy after three months of expiry in that case no
claim bonus is not given to the insured but policy is renewed subject to inspection of car.

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10.6. Depreciation in car claims

As of now, even for a new car, insurance policy is given only for 95% of the car value
and not for full value. As per insurance companies the moment a car comes out of
showroom its price goes down by about 5%. And as such coverage is given only for 95%
of the value.

In case of car claims 50% depreciation is applied on plastic parts such as bumper / light
etc.

30% depreciation is applied on rubber parts such as tyre / beadings etc.

Nil depreciation on glass items.

On metal parts following depreciation is applied:

In 1
st
year of policy 5% depreciation

In 2
nd
year of policy 10% depreciation

In 3
rd
year of policy 15% depreciation and so on.

Labour charges is paid in full.

Denting and painting charges 100% paid by the company if damage took place in
accident. For old damages due to wear and tear and use, denting and painting charges are
not paid.


10.7. Car policy exclusions

Loss due to driving by invalid licence holder or by driver under influence of alcohol are
rejected.
10.8. Status of learners licence for claims

However it may be noted that even learners licence is also a valid licence to be able to
lodge car insurance claim so long as he not found violating norms as per motor vehicle
act as per recent court verdict.

In case, the learner driver cannot prove whether he was, say, accompanied by an expert
driver, or having l mark on the car at the time of accident, then insurance company will
be correct in rejecting the claim for injury or death to pedestrian or damage to another
car. The learner driver will be liable to indemnify for such losses.


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10.9. Bargain for better coverage of car insurance and not bargain for less premium

Many people compare insurance premium quoted by two different companies forgetting
that you cannot buy Maruti Zen at the price of Maruti 800. All companies are basically
regulated by IRDA. E.g. In case of car insurance one should take coverage for personal
accident (p.a.) Of owner, p.a. Of driver, p.a. Of five un named passengers, insurance of
additional accessories, make better bargain for higher value of car ( I.D.V.). Though
insurance companies would invariably try to insure for less value. Get immediate
endorsement on insurance policy for CNG kit after paying additional premium and
obtaining RC duly certified for CNG. In short, no one would like to insure you for greater
risks while accepting lesser premium. Only an intelligent policy holder can bargain for
better coverage.

Should one be ready to pay less insurance premium as well as take benefit of
comprehensive car insurance policy, he may opt of higher excess or deductible to pay
less insurance premium. E.g. In case he opts for deductible of Rs. 25,000.00 per claim, he
will get Rs. 75,000.00 against a claim of Rs. 1.00 lacs.
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10.10. Third party claim for car accidents/ mact claim
While driving a car one runs the risk of accidents by the use of motor vehicle. The
accident may cause death or fatal injury to a third party. That is why insurance is a must
for driving a motor vehicle so that relief by way of compensation may be extended to the
victim of road accident. Now consider an example of three persons in motor car accident
as per following:-

Say in case of a motor truck accident three people die.
Mr. Ramdin, a peon, aged 40 years, earning Rs. 5,000.00 p.m.
Or Rs. 60,000.00 p.a.

Mr. Shyam , officer aged 40 years, earning Rs. 50,000.00 p.m.
Or Rs. 6,00,000.00 p.a.

Mr. Hari , business man aged 40 years earning Rs. 5,00,000.00 p.m.
Or Rs. 60,00,000.00 p.a.

Though they all of them of about same age and died in the same road accident by a truck
but their claim amount would depend on their income earning capacity.

They may say get multiplier of 10 after deducting amount spent to earn the amount, loss
of love to family members, and adding loss of bread earning member of the family.

The third party claim payable by the insurance company of the truck may be as follows:-


Mr. Ramdin, may get Rs. 60,000.00 x 10 = 6.00 lacs

Mr. Shyam , may get Rs 6,00,000.00 x 10 = 60.00 lacs

Mr. Hari , may get Rs. 60,00,000.00 x 10 = 6.00 crores

In case of injury or death to third party, the local police can be approached. In case of
fracture etc. To third party, the driver can be released after M.L.C. Of the injured. In case
of death of third party, it is bailable offence and one can be released after seizing R.C. Of
car, insurance policy and driving licence. The vehicle can be checked for mechanical
fault. The local police can arrest the driver to contain law and order and later on release
the driver on bail.
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10.11 better to take cash less car insurance policy than ordinary car insurance
policy.

These days you start getting calls from various insurance companies long before expiry
of your car insurance. You are confused where to get the insurance policy renewed.
Should you opt for insurance from a company who does not have memorandum of
understanding (M.O.U.) With your car service provider, in that case if you have a claim
at a later date, then you will have to face the trouble of handling the claim your self as per
following procedure:-

Inform the insurance company about the accident by way of written intimation letter
along with policy number and car number. Collect claim form from the insurance
company.

Get estimate from the authorised car service provider

Submit estimate with the insurance company for appointment of surveyor as per financial
authority. In case of claim of higher amount the branch office may not have power to
appoint surveyor. The divisional office may have to exercise their power to appoint from
their panel of surveyors.

Get survey done and then only the surveyor would clear the car service company to start
repair work. Surveyor would ensure that the claim is genuine and necessary loss
minimisation efforts have been by car Service Company. Repair will be allowed where
ever possible in place change of part. Car insurance policy, registration certificate (R.C.)
of car and licence to drive may have to be shown in original to the surveyor. Claim form
has to be filled up with details about the loss, how accident took place, where was the car
at the time of loss, which area of the car got damaged and how. Car damage has to be
justified. Pre existing damages are not allowed by the insurance surveyor.

After completion of repair work surveyor would again come and verify that excess work
has not been done by the car repair company.

Make payment for repair in full, collect bill and receipt. Submit proof of payment to
insurance company in original and photo copy of bill and receipt to surveyor for
finalisation of survey report and onward submission to insurance company.

Collect scarp from the car service company. Collect salvage memo in duplicate from
insurance company to deposit car scrap with scrap godown of the insurance company.
Collect salvage memo duly receipted in proof of having deposited scrap with authorised
scarp godown and then submit it with the insurance company. Scrap godowns are far
from the city and operates at specific time for scrap deposit. You may have to visit twice
should you fail in first attempt. Otherwise the insurance company may deduct say 2% for
plastic items and say 10% for metal items being value of scrap from your claim.


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After scrap is deposited and surveyor has submitted final survey report to insurance
company, finally await for reasonable time which can be any time from days to few
weeks for processing of claim by insurance company and issue of cheque. Till that time it
is your investment in the repair of the car. You may have to take few rounds and calls to
the insurance company to ensure that your file is processed.

Finally what you get is not the whole of the amount of the claim. Deduction is made to
the extent of 50% for plastic items, 10% and above is deducted for metal items depending
on age of your vehicle, extra work done not involved in the accident is not paid by the
insurance company.

For example:-
Side powered mirror may cost Rs. 5,000.00 by Maruti authorised vendor. You get 50%
less claim since it is plastic item.
Deduct Rs. 2,500.00

New door may cost Rs. 10,000.00 and it is say 3 years old. Depreciation of 15% is
applicable. Deduct Rs. 1,500.00

Applicable excess to be paid by policy holder. For car up to 1499 cc Rs. 500.00 is
deducted as excess and for car 1500 cc and above Rs. 1,000.00 is deducted as excess.
Deduct Rs. 1,000.00
Total Rs. 5,000.00

Thus from a claim for Rs. 15,000.00, Rs. 5,000.00 may be deducted by the insurance
company to pay you finally Rs. 10,000.00.

What about the no claim bonus of say 40% availed by you and not available any more?
Say on premium of Rs. 15,000.00 you loose no claim bonus of Rs. 6,000.00. Thus your
total loss due to accident is Rs. 6,000.00 + Rs. 5,000.00= Rs. 11,000.00.

Net claim Rs. 15,000.00 less Rs. 11,000.00 = 4,000.00.

Now a days insurance companies are asking car owners to pay to car repair companies by
credit card so that you can take benefit of free period of say one month. But what about
compulsory 2% credit card charge of Rs. 300.00 on payment of Rs. 15,000.00. This adds
to additional cost which can be much more if the insurance company decides to late
process the claim.

In effect, to take a claim you have to invest time of say week or two weeks apart from
investment of Rs. 15,000.00 to take net claim of Rs. 4,000.00 after depreciation and
loosing no claim bonus.





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Better to take cash less car insurance policy

Would it not be better to take cash less insurance and not suffer any of the above hassles
of insurance claim and take several half day leave from your office? One should enquire
from the car service company as to which insurance companies have signed M.O.U. With
them and cash less facility is available. You simply give the car to the service provider
and pay balance amount of claim which is not paid by the insurance company to take
delivery of the car duly repaired.

Care should be taken to note that surveyor in both the cases will not blindly agree to
change whatever your car service man may want to change. Surveyor may insist for
repair of certain items in place of out right change.

In case of more than two claims cash less facility may be with drawn and you may have
to go through non cash less facility and the rigours of normal insurance claim and endless
visit to insurance company.




Final lesson in case of car accident, better not claim
For all practical purposes it is always better to try all other options to get a car repaired in
place of lodging insurance claim. Outside repairing may turn out to be much faster and
cheaper, while same quality of repair may be done. In place of two weeks, work may be
done in say 4 days. You may not be at the mercy of insurance company, surveyor, scrap
godown and weeks of waiting to get claim cheque having already paid by squeezing your
budget. In place of expenditure of Rs. 15,000.00 one may be able to get the car repaired
for as less as Rs. 3,000.00 only as against Rs. 5,000.00 and retain no claim bonus of Rs.
6,000.00 which keeps increasing in future and is an asset while you sell this car and by a
new one.
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Chapter 11

11. General knowledge about insurance claim related matters

11.1. Proposal form

No one knows about a person other than he himself. The proposer / one who wants
insurance coverage should fill up the proposal form himself and not sign blank to be
filled up by the agent or development officer. All questions asked in the proposal form
should be replied so that the insurer can know the insured in a better way. It is expected
of the insurer to insure the risk as per proposal form. The insured knows all about himself
and wants to cover the risk. The insurer does not know anything about the insured but
wants to insure the risk. The knowledge gap is filled up by the proposal form. All
material information should be filled up. At a later date on the happening of an incident
the insurer should not say that he was not disclosed material fact asked in the proposal
form and repudiate his claim. The proposal form is your intention to cover certain risk /
assets. The technical part can be discussed with the insurance agent / broker /
development officer, then only sign it. A copy of proposal form must be kept by the
policy holder so that he can know what he has intended to insure and what wordings are
expected in the insurance policy. In case of bank insurance policy proposal form is not
filled up mostly. As such insurance company or the bank would not have copy of the
proposal form except having insurance policy.

11.2. Letter of intension to insure

In case details cannot be accommodated in the proposal form, a separate letter in detail
may be enclosed with the proposal form as intention to insure. If the insured has not filled
up any proposal form, then he can give a separate letter detailing the coverage sought. In
the letter he can mention the item, rate, value, place of insurance and any other coverage
that he may like to get. In the absence of a proposal form a letter can also be taken as
intension of the insured to insure and the same can be basis of settlement of claim. Many
a times there is not enough space in the insurance policy to write, and proposal form has
also not been taken, in such cases letter of intension to insure is the sole criteria for
settlement of claim. E.g. an event organiser takes insurance policy for the items displayed
in tents/stalls by different shop keepers and in case of fire only his letter of intension to
insure various stalls not owned by him will clarify the purpose of insurance. In such a
case the organiser is not owner of the goods but he is interested in safety of stalls.
Leaving important columns blank in the proposal form may also hint towards not
disclosing material information to the insurance company. Finally claims if any may also
be rejected by the insurance company for want of material information in the proposal
form.






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11.3. Insurance policy taken for formality rendering it futile

Many people take insurance policy only as formality and find them cornered when
insurance claim takes place. They bring bad name to insurance companies. E.g. Mr. Atul
Gupta, an engineer by qualification had taken insurance policy worth Rs. 2.00 lacs
covering his stock of inverters. In the mean time he had changes his business to CDMA/
GSM phones repairing in big way. He had stock at risk worth Rs. 20.00 lacs. He did not
bother to take endorsement on the insurance policy for new items. A burglary took place
in his premises for stock worth Rs. 2.00 lacs. Even if the claim was considered, coverage
would have been for only Rs. 20,000.00 since only 10% of stock at risk was insured.
More over the item lost was not insured, rendering the claim not covered in the policy.
Such people at the end suffer loss as well as run huge risk by saving little amount of
insurance premium.



11.4. Condition of reasonable care clause applicable to almost all policies

Note must be made that in the general condition of insurance policy there is always a
clause of reasonable care by insured to safe guard the insured property. For a claim to fall
under any of the clauses it must be proved that the insured had taken reasonable care to
protect the insured property other wise the claim may be rejected if it is proved that he
had not taken reasonable care. Thought the reasonable care clause is quite vague and will
carry meaning depending on the circumstances of the case.


11.5. Coverage of items in the insurance policy

The items to be covered in the insurance policy should be as wide as possible and not
very specific. The reason being that, at the time of a claim the insurance company is at
liberty to reject a claim if the items lost are not covered in the policy. The insurance
company may argue that they have not covered what is lost since there is no mention of
the items lost in the insurance policy. The items lost are different from that of covered in
the insurance policy.

In case a watch shop takes insurance policy for watches, table clocks, wrist watches in
there shop. Then the insurance company will admit a claim only if watches, table clocks,
wrist watches are lost / affected. The insured would not get insurance claim if he suffers
loss due to burglary / fire of say cassettes or c.d. Which are not covered under the policy.

As such it is best to put wordings in the proposal form or letter of intension to insure as
wide as possible. The policy holder should also ensure that in the insurance policy
desired wording has been mentioned. So far as insurance company is concerned it does
not make any difference to them if the items insured is watches, toys, cassettes, c.d.s,
games since they all attract same rating of insurance premium.

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So the wording should be watches, table clocks, wrist watches, cassettes, c.d.s,
electronic items and any other item related to insureds trade or

all types of electronic, non electronic items and various other items related to insureds
trade.

It may be noted that the insured can later on request for endorsement on the policy if he
starts dealing in new items which are not mentioned in the policy. In case of change of
business, the insured can make a request for suitable endorsement in the policy. Insurance
premium is charged as per business of insured. In case of hazardous items insurance
premium is more and separate conditions are attached to the insurance policy.

In case the insurance company finds that the items insured and the items that were stolen
does not tally as per as insurance policy issued, then they are at liberty to reject a claim.
Even if the matter goes to court, it is very difficult to prove that one who deals in grocery
items and he suffers loss of cassettes unless the cassettes are found mentioned in the
insurance policy or the insured has taken insurance policy for all type of items. However,
insurance company can take the plea that they never intended to give coverage of
cassettes. As such they are not responsible for the loss.

11.6. Change of business or items.

If the policy holder adds any new items in his business, then he should check with his
insurance policy whether such an item is covered in the insurance policy or not. If not,
then the policy holder should write to the insurance company for adding those new items
in the insurance policy and obtain proper acknowledgement of letter followed by proper
endorsement in the policy. Addition of new items or obtaining endorsement to the policy
does not cost any thing unless sum assured is increased.

11.7. Changes not made in insurance policy
If required change is not made in the insurance policy as requested, then a vigilant
insured should either vigorously follow it for execution or ask for cancellation of
insurance policy and not sit idle. For example, stock kept in the open outside the plant
but within factory premises is requested to included in the insurance policy for risk
coverage. But insurance company does not act and burglary takes place. Insurance
company is not liable for the loss of stock kept in the open, since they never agreed to the
amendment.

11.8. Contract of insurance policy
Insurance policy is a contract between policy holder and insurance company. Should any
loss takes place as per the insurance policy, insurance company would indemnify /
compensate the loss to the policy holder as per policy and its terms and conditions. At the
time of claim it is duty of policy holder to provide necessary papers in support of the
claim to the surveyor appointed for assessment of loss by insurance company. Insurance
policy is a contract. Everything has to be looked from the angle of coverage given as well
as terms and conditions to the policy issued.

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Why papers are not asked for at the time of issuing insurance policy.

At the time of issue of insurance policy the proposer is asked to fill up a proposal form
for issue of insurance policy. He cannot be asked to produce all the papers / books of
accounts purchase bills / ownership proof at the time of issue of insurance policy.
Insurance contract is a matter of trust. The insurance company believes that whatever is
declared in the proposal form and sought to be covered under the insurance policy is
correctly mentioned. Should there be a loss the policy holder can produce relevant
papers/documents in support of the claim lodged.

Many policy holders asks why at the time of issue of insurance policy, the insurance
company did not ask me for bill of say washing machine or fridge or jewellery or stock
or machines insured under the policy. At the time of issuing insurance policy they have
saliently accepted insurance premium and now they are asking hundreds of questions /
papers / documents in support of the claim as if policy holder is himself a thief or
burglar and has masterminded the loss. The policy holder has to understand that he has
to provide relevant documents in support of his claim. Otherwise insurance companies
can reject the claim if the policy holder cannot give relevant papers in support of his
claim. How the insurance company can know that his claim is genuine in the absence of
relevant papers / documents in support of his claim. The papers and documents required
in support of a claim would depend on the nature of loss that has taken place.

For lakhs of policies issued by various insurance companies, it is not possible to store all
papers not knowing what type of loss may arise. Out of lakhs of policies issued. Claim
may arise only in few cases. It is the duty of the policy holder at the time of taking
insurance policy that he can take photographs / keep bills / maintain files / keep copy of
relevant papers / copy of proposal form etc. In support of items insured.

11.9. Address of insured

The address of the place where the items / stocks / jewellery / cash / machines etc. Are
kept and covered as per contract of insurance policy is very important. The insurance
company has agreed to cover those specific premises only as mentioned in the insurance
policy and no other address. The items cannot be kept at any other place except at the
specific address mentioned in the insurance policy. Insurance companies can reject a
claim if items covered under the policy are kept at some other address.

Should there be a change of address the policy holder should immediately inform the
insurance company in writing and duly acknowledged followed by endorsement in
policy.

Thus the contract of insurance is amended and new site/premises is covered in the policy.
It may not always result into payment of extra premium.

If the stock is to be kept at various locations, then insurance companies can ask for extra
premium and issue a floater policy i.e. the stock can float from one place to the other as
per policy up to the amount as agreed.
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Many people changes houses / factories / offices without information to insurance
companies, such cases are ideal for rejection of claim.


11.10. Change of ownership of insured

In case there is any change in name of insured / ownership / merger / take over, in such
cases proof of insurable interest should be informed to the insurance company and that
the business is continuing in a different or same name.

A partnership firm or a proprietorship firm taken over by another company may result
change of name or ownership of the firm. In such cases due information should be given
to the insurance company with acknowledgement followed by endorsement to policy and
payment of extra premium if any.

In case there is mistake in the name of policy holder on the insurance policy, then
immediate notice should be given to the insurance company. E.g. M/s A.G. Enterprises
Pvt. Ltd. Is mentioned as m/s A.G. Enterprises only. It may be possible that another firm
by the name m/s A.G. Enterprises also exists. There is wide difference between the two
names since one is a Pvt. Ltd. Company and another one may be a partnership or
proprietorship firm. In the absence of proposal form or old insurance policy it will be
difficult to prove that m/s A.G. Enterprises Pvt. Ltd. Was sought to be covered under the
policy.

It has been noticed that most policy holders do not even bother to look at the insurance
policy once they pay premium. They think that having paid insurance premium the loss is
covered under the insurance policy. The agent or the development officer will fully take
care of interest of the policy holder who forgets that the agent or the development officer
are merely part of marketing team of the insurance company and not part of claim
settlement team. The same policy holder would read a partnership deed properly or even
read a contract properly before signing but would never bother to read a insurance policy
since he does not have to sign it. The policy holder may find on reading the policy that
the name of the firm is not properly mentioned or items covered is also not properly
mentioned in the policy.

11.11. Period of policy.

It would be much easier for many a people especially Lawyers / C.A. / Engineers to
understand better if we were to say that it is a contract between policy holder and
insurance company for a specific period to cover the risk of specific items at a particular
address as per terms and conditions annexed to the insurance policy.

If the period of insurance policy is say 01.04.04 (after midnight) to 31.03.05(up to mid
night), in that case the loss has to specifically fall during the period of insurance policy.
Any loss that cannot be proved having occurred on or before 31.03.05 cannot be covered
in the said insurance policy.
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E.g. If a burglary takes place between 29.03.05 to 02.04.05 when the factory was not
working or house was not inhabited or the loss could not be discovered because the room
or godown was not opened during that period. In that case onus is on the policy holder to
prove that loss took place on or before 31.03.05 and not later. Otherwise insurance
company would not be responsible for the loss.

If the insurance policy is in continuance i.e. Old policy had been renewed w.e.f. 01.04.05
to 31.03.06 then it becomes very easy to cover the claim in one of the policies. Problem
would arise if the policy is not renewed.

11.12. Policy only signed by insurance company

Unlike a usual contract, the proposer signs first on the proposal form. The proposer is the
would be policy holder. The insurance company issues insurance policy if the proposal
form is accepted and premium is accompanied. The policy document is signed by the
insurance company as a token of having accepted the proposal and insurance premium.
The insurance policy is subject to terms and conditions accompanied with the insurance
policy. The terms and conditions are not signed by the insurance company or by the
policy holder, as such no one bothers about it. The policy terms and conditions are the
conditions on which the policy is issued.

This is a unique contract where the terms and conditions are not signed either by the
insurer or the insured unlike usual agreement where the terms and conditions are also
signed by both the parties.


In insurance, terms and conditions are normally usual, similar and applicable to all
policies of similar kind. The terms and conditions of similar types of insurance policies
can not be altered and are universally applicable to one and all equally of a particular type
of policy. The insurance polices once drafted are sent to IRDA along with terms and
conditions for policy approval. Thats why all terms and conditions of similar type of
insurance policy in whole of the country have similar terms and conditions.

These terms and conditions must be called for if not accompanied by insurance policy.
Even written request may be made to supply terms and conditions which are applicable to
the insurance policy.

11.13. Terms and conditions not given by insurance company

Sometimes the insurance companies do not enclose the terms and conditions under which
the insurance policy is issued. The insurance policy is not complete without the terms and
conditions. In such cases the policy holder cannot know the terms and conditions
governing the policy.

If the terms and conditions are not provided by the insurance company in that case the
insurance company may be said to be deficient in services and case is tenable in the
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consumer court. Non observance of terms and conditions or exclusions to the insurance
policy by the policy holder may not be a reason to reject the claim if pleaded in the court.



11.14. Bank stock statement

It is not necessary that stock register or actual stock must tally to the stock statement
submitted with banks for availing bank limit against stock hypothecation limit. It is bare
fact that small / medium borrowers does submits stock statements with the bank just to
fulfil bank formalities. Banks are additionally covered against stock financed, by
collateral security. As such banks though makes advance against stock but the stock
details may not tally exactly to the physical stock or stock register. Now a days lot of
banks have stopped taking monthly stock statements, rather they are taking quarterly or
half yearly stock statements or only final audited balance sheet to assess business of
borrower. As such stock statements are loosing their importance.

One can argue that loss assessment need not be made as per stock statement given to
bank but assessment should be made on the basis of actual stock as per books or as per
stock register. But insurance companies are heavily depending on stock statement
submitted to bank, for assessment of loss.

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11.15. Sum insured

Sum insured under an insurance policy is the amount for which insurance company is
responsible should there be a claim. This amount must be closely monitored and
examined.

In case of under insurance i.e. Total stock was worth say Rs. 10 lakhs but insurance
policy has been taken for Rs. 4 lakhs or 40% of stock at risk. In case of a loss of say Rs. 1
lakh, only 40% of Rs. 1 lakh = Rs. 40,000.00 would be payable by insurance company.

Many policy holders obtain less sum insured at the time of taking insurance policy. Thus
they save small amount of insurance premium while covering the risk. At the time of a
claim the policy holder would be at a big loss due to taking less coverage. Insurance
premium can always be debited to the profit and loss account and claimed as expenditure.
Thus the impact is further reduced after savings of income tax of about 33%. At the time
of a claim the insured would raise several points including why he was not advised to
take proper coverage but it would lead them no where. Save a penny and loose a pound.


Thus, adequate coverage should always be taken by the policy holder. The sum insured
can always be increased by paying extra premium during the policy period. The extra
premium is paid for extra cover from the date of coverage and onwards till expiry of
policy.

If stock as per profit and loss account as on 31-3-2007 is say Rs. 10.00 lacs, then it is
quite normal that the agent or the development officer would advise to take insurance
policy of Rs. 10.00 lacs only. There is no way to know that during the year highest stock
was worth Rs. 30.00 lacs say at the time of peak season in October. In such a case it
would be wrong to take insurance policy of Rs. 10.00 lacs. If there is loss in October 07
of even Rs. 6.00 lacs and total stock was worth Rs. 30.00 lacs with the policy holder, then
he would be paid only Rs. 2.00 lacs since only 33% insurance cover was taken by the
policy holder. Say premium for Rs. 10.00 lacs stock was Rs. 3,000.00 and he would have
to pay Rs. 9,000.00 for stock coverage of Rs. 30.00 lacs. Thus by saving Rs. 6,000.00, the
policy holder suffered loss of Rs. 4.00 lacs (Rs. 6.00 lacs less Rs. 2.00 lacs). As such it is
always advisable to take coverage for a little more than highest stock at any time during
the previous year.

In case of jewellers or house hold suitable higher sum insured may be taken where prices
of gold are regularly increasing. Gold was worth say Rs. 8,000.00 per 10 grams a year
back and at time of insurance it is say worth Rs. 12,000.00 per 10 gram, in such a case
coverage should be taken for higher amount only.

11.16. Dishonour of insurance premium cheque

It may be noted that in case of dishonour of insurance premium cheque for insufficient
funds, the insurance company cannot be expected to honour the insurance policy either.

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11.17. First loss basis coverage

In case of huge stock, one need not to take coverage of whole of the stock, if whole of the
stock cannot be practically stolen at one time. E.g. M/s Verma and company deals in food
grains and they have ten godowns in which total stock worth Rs. 10.00 crores having
weight of 2000 tonnes (@Rs. 50,000.00 per tonne) has been stored. One big truck can
carry about 50 tones of food grains and 5 such trucks can carry total 250 tonnes. Cost of
250 tonnes is Rs. 1.25 crores. In such cases it is advisable to insure stock worth Rs. 1.25
crores on first loss basis against burglary. However against flood and fire insurance can
be taken for Rs.10.00 crores since total loss can take place at one time. Similar logic can
be applied to various factories and plants spread over different areas. This way one can
take coverage logically as well as save insurance premium.

11.18. Short period excess stock

During peak season one may opt for specific month / period coverage of the excess stock.
Even one month policy can be issued by insurance company.

Short term extra policy can be taken to cover the risk. In times of peak season like Diwali
or Christmas when the stock is more additional short period of even a months policy can
be taken. Thus, huge risk can be covered by paying small premium. Normally it is seen
that around Diwali, Dusshera, summer holidays and during new year stock is very high
with most of the firms. It would be prudent to take additional cover from October to
January.


11.19 last minute insurance

Insurance policy of a factory say is expiring on 5-5-2008 at 12.00 hours. On the last day
if one is taking insurance policy renewal, he has to ensure that proposal form is filled and
signed, payment has either been made by cash or by draft, receipt has been issued, and
cover note or policy has been taken.

If in this case cheque has been given on 5-5-2008 and the cheque is not deposited by the
insurance company on 5-5-2008 or 6-5-2008. On 6-5-2008 the factory suffers major fire
loss and insurance company is intimated about the same on 7-5-2008. Now the insurance
company has an option not to accept the risk by not sending the cheque in clearing and
refuse to insure the factory in view of commercial decision of huge loss on the first day
itself.

No contract has been made without receiving insurance premium. Mere receipt of cheque
is not enough to enforce the claim. By 9-5-2008 the insurance company may return the
cheque along with a letter not accepting the risk.


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11.20 Close Proximity Claim

In case loss takes place within say 7 days of issue of new insurance policy, the claim
needs investigation to ensure that the loss has not taken place before issue of policy.
Receipt of premium, exact payment date is verified from bank records, proposal form,
serial number of the policy, date of acceptance of the risk, cheque deposit pay in slip,
date and time of occurrence of loss is investigated in detail. Effort may be made to verify
from witness or neighbour that it is not an old incidence before policy period.
Investigation may be made by separate investigator also about the claim.

11.21 Inspection by insurance companies

Inspection report about visit to the insured premises by development officer, branch
manager, or other officials of the insurance companies is an added advantage at the time
of issue of insurance policy. Visit by insurance company officials is made to ensure that
whatever is mentioned in the proposal form does exist and is acceptable to the insurance
company for the purpose of issue of insurance policy. In case of a claim, the inspection
report can be of great help to the insured. Insurance companies cannot deny a claim on
flimsy grounds. For example, M/s A & Co. Had a local safe in their jewellery shop. The
safe was inspected by development officer and inspection report was issued. The risk
was insured by the insurance company on the basis of proposal form and inspection
report of development officer. At a later date in case of a claim, insurance company
cannot take the plea that the local safe is not of standard make and the claim is rejected.

11.22 Loss minimisation

The insured should do everything possible to minimise the loss as if they are not insured.
In case of fire claim the insured may separate good stock from damaged goods under fire.
Fire extinguishers may be used to control fire from further spreading. In case of flood,
the insured may try to minimise the loss by keeping the stock at elevated level.
Immediate steps may be taken to drain out flood water. Insured should take all
practicable steps to reduce loss.

11.23. Self risk coverage and exclusions

Care must be taken to discuss at length exclusion in the policy and must be high lighted.
One should do risk analysis before taking a policy. What can be covered under the
insurance policy and what need not be? Certain risk are retained and covered by the
insured himself and he need not pay insurance premium for these risks to insurance
company. He is his own insurer.

Exclusions are in a way self insurance. The insurance company is not responsible for
such losses covered under the exclusion clause. Loss due to mysterious fire is covered by
insured himself.


Small claims can be self insured and does not need insurance policy.
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Loss due to pilferage by insiders or outsiders and discovered during stock taking can be
covered by self insurance. In every company certain % of stock is always found short
during annual stock taking. In case of stock worth Rs. 1.00 crore shortage up to Rs. 1.00
lac being one percentage of stock may be considered normal. Such shortages are covered
by self insurance.

Loss due to infidelity of staff in burglary policy is covered by insured himself. One has
to take separate insurance policy for loss due to involvement of staff. One may be over
confident that there are security guards and CCTV for 24 hours and hence no chance of
loss due to infidelity of staff. In such a case the staff may empty the factory of stock
worth Rs. 1.00 crores in connivance with security guards. Such losses due to infidelity of
staff are covered by self insurance.

In case of cash in safe policy cash not kept in safe is covered by insured himself. The
insured may have kept cash worth Rs. 20.00 lacs in a drawer duly locked. In case of
burglary of cash, such loss is covered by self insurance only.

In case of burglary policy loss due to theft by not applying force is covered by insured
himself.

In case of fire or burglary loss in a factory loss of profit is covered by insured himself.
A factory running in profit of Rs. 1.00 crore a year results fire and it takes one year to re
start it. You are the insurer in such circumstances for loss of profit of Rs. 1.00 crore.

Loss of data in the computer in case of fire is covered by insured himself.
Man days to feed data or source the lost data may need say Rs. 50.00 lacs. In such a case
insured is insurer for the value of data lost.

By taking higher deductibles or excess one can increase self insurance.
In case of car insurance one can opt for higher deductibles of say 15,000.00 per claim and
pay less insurance premium. It is a case of self insurance by Rs. 15,000.00. You are the
insurer in such circumstances for the deductible of Rs. 15,000.00.

By violating law, you are substituting your self as insurer.
In case of drink / drive or driven by unlicensed driver or driven by learners license
holder not accompanied by proper license holder violating of motor vehicle rules causing
accident in the car worth Rs. 1.50 lacs, you are the insurer in such circumstances.

In case of insurance policy taken on depreciated value, difference between
reinstatement value and depreciated value is self insurance.
In case of fire reinstatement value of a machine may be
Rs. 20 .00 lacs but depreciated value at which insurance has been taken is worth Rs.
5.00 lacs. In such a case 25% is covered by insurance company and 75% is covered by
way of self insurance.


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Under insurance is self insurance.
You may have taken insurance policy for Rs. 40.00 lacs but stock risk was worth Rs.
100.00 lacs. In such a case 40% is covered by insurance company and 60% is covered by
way of self insurance.

Risk of items written off in the balance sheet is covered by insured himself.
Machines worth initially of Rs. 2.00 crores after say ten years on straight line
depreciation @10.00 % p.a. Are written off in the balance sheet will have nil value in
fixed assets schedule and accordingly insurance policy taken for nil value. Most of the
companies consider fixed assets schedule for insurance purpose. The market value for
such a machine may be say
Rs. 50.00 lacs and good for production for another 5 years. You are self insurer for this
written off machine worth market value of Rs. 50.00 lacs in case of fire loss.


In case of first loss basis insurance, balance loss over and above sum insured is covered
by insured himself.
You have five godowns having stock worth Rs. 5.00 crores and first loss insurance of Rs.
1.00 crore since you assume loss due to say burglary cannot exceed Rs. 1.00 crore at a
time. In case of loss of stock worth Rs. 1.50 crores, you are self insurer worth Rs. 50.00
lacs.

Merely taking insurance policy does not mean that you have taken 100% coverage
against all possible risks. Even in case of all risk policy there are exclusions for which
insurance company is not responsible and you are considered as its self insurer. It is
almost impossible to take 100% insurance and the proposition may be too costly. One has
to weigh cost in terms of premium and benefit of claim analysis. One has to consider
what risks are involved and which ones need out side insurance.
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11.24. Burglary / fire once in a life time experience

Burglary or fire is once in a life time experience for many people. Getting a burglary
experience or suffer fire loss cannot be cherished by anyone. Even such experience can
be enough for an average person in a life time. After specially burglary one gets feeling
of insecurity and unprepared ness.

Now, think of the reverse, the insurance company gets many a cases of burglary or fire
every now and then. They are well experienced with such type of losses. It is day to day
affair for them. Same is the case with insurance surveyor who are well versed with such
type of losses. It is day to day business for them. The surveyors are well trained /
experienced / technically qualified to assess a loss of burglary / fire.

The common policy holder does not know what is expected of him to provide papers /
documents in support of the claim, should there be a loss. He is caught unaware after the
loss. And he does not know whom to look upon for advice.

The surveyor submits survey report to the insurance company. The surveyor can be a c.a.,
engineer, doctor or qualified to be a surveyor as per technical degree with him. So he is
quite technically qualified and experienced in handling insurance claims. But what about
the common policy holder who is sometimes not qualified, no experience, no degree, no
understanding of insurance related technical matters. Let such policy holders be armed
with the knowledge of insurance.

11.25. Insurance advisor of industries

The industries and big insurance policy holders can afford to keep insurance advisors
who have wide experience in insurance field. The industries can avail of services of these
experienced people while dealing with insurance companies for their claims. But the
small industries / small businessman / common insurance policy holders have no such
advisors since they cost a lot.


For big industries, the insurance companies consider their proposal seriously and give
them expert advice in view of the fact that these clients pays them huge amount of
insurance premium. But what about a small businessman who pays say Rs. 1000.00 only
as insurance premium or a small house holder who pays only Rs. 400.00 as insurance
premium, he has no one to fall back upon for advice. The number of such small people is
huge or to say in thousands and lakhs in every city. By obtaining insurance related
knowledge they can become their own advisor.







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11.26. Development officers v/s claim department

The development officer is basically a marketing person who sells insurance policies. He
does not process a claim when a loss takes place. The claim processing department is a
technical department headed by technically qualified persons. The development officer is
good in calculating proper insurance premium as per insurance company norms. What the
development officer can advice is a little more than a layman. He is not trained to handle
insurance claims. He can at best remind you about renewal of insurance policy. He will
meet you while taking insurance policy; ask you details of coverage sought. So it is better
for the insurance policy holder to educate himself and be an intelligent insurance policy
holder who can be best advisor for his own needs. Such an intelligent policy holder is
good for the society. He will adequately cover his assets and risk, pay proper insurance
premium and not save them at the cost of risk / coverage. At the end, the insurance policy
holder can be his own development officer as well as surveyor should there be a claim.

11.27. New regime of brokers

Now a days insurance brokers have been authorised by IRDA and their services can be of
great help to policy holders. The brokers have good infrastructure in terms of servicing
by way of technical help to take a policy, changes in policy after it has been issued, help
and guidance in case of a claim. Brokers are of good use specifically in case of corporate
customers. The brokers are having good expertise in the field of insurance and can be
accessed in case of any problem. Now a days there are brokers in every city. They work
as per guide lines of IRDA and are in touch with more than one insurance company and
are INA position to bargain better coverage at reasonable insurance premium.

The brokers are attached to various companies and are technically sound. Their exposure
is of good use to policy holders. Proper intention letter and proposal form is taken and
suitable policy is issued to policy holders at competitive rate by insurance companies.

The offices of insurance brokers are manned by technically qualified staff like
Engineers/C.A. And insurance qualified staff. As a result there is good quality in issue of
insurance policy and quantitative increase in business of insurance companies.

w.e.f. 01.01.07 the insurance market is detariffed to a large extent. The premium can be
liberally decided by insurance companies and discounts given to good customers. The
broker can be very useful in this context of presenting deserving cases to the insurance
companies. Brokers are in way very good advisors.

IRDA has very good control over brokers to ensure their technical expertise.
CA/MBA/Engg./ businessmen from all sectors have been issued brokers license for
acting as quality link between insured and insurer.



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11.28. Insurance policy taken by banks on behalf of borrowers

Now a days most of the banks are themselves taking insurance policy covering their
advances. They have tied up with one insurance company and paying them all the
premium. This way banks get huge amount of brokerage as corporate agent / broker. This
is termed as bank assurance. This ensures banks hefty brokerage on the insurance
premium paid. Thus it is a source of income which was so far not going to their pocket.

It is quite common that banks, who lends a borrower, obtains insurance policy on behalf
of the borrower to protect interest of the bank. If bank has given loan of Rs. 10 lakhs on
the stock of a company, then bank obtains insurance policy covering the stock. Though
banks do take collateral security / personal guarantee etc. But above all they obtain
suitable insurance policy to cover losses against risk of burglary or fire of the stock which
is financed by the bank.

In case of loss / claim, all the formalities of insurance claim will be responsibility of the
policy holder / borrower.

Now, even if due to any reason what so ever, a claim say for burglary is rejected by the
insurance company on the ground that what is insured is grocery items and what is
burgled is electronic items. The bank is some how safe since collateral security / personal
guarantee is enforceable if the borrower cannot repay the loan amount. In such cases it is
in the interest of the borrower to obtain a copy of the insurance policy from the bank and
check the relevant coverage. If any alteration is required to the items covered or address
of factory in that case it must be informed to the insurance company by way of a letter
and obtain suitable policy endorsement. The borrower cannot plead that I would not
repay the loan since bank has taken a wrongly worded insurance policy.

In all the cases, insurance premium is debited out of the account of the borrower by the
bank. It is the money of the borrower that is paid to the insurance company as insurance
premium.

Suppose the insured has borrowed Rs. 10.00 lakhs from the bank but his stock is worth
Rs. 50.00 lakhs. As per bank stock statement the borrower has declared only Rs. 20.00
lakhs stock which is enough to cover the borrowed amount or drawing power. In such
cases the bank would take insurance policy of Rs. 20 lakhs only. However it is in the
interest of the borrower to either increase the insurance policy amount to Rs. 50.00 lakhs
or obtain another insurance policy of Rs. 30.00 lakhs without bank clause, so that in case
of any loss the borrower is not paid less claim by insurance company because of under
insurance.

Banks give huge loan against stock / property but insurance companies charge small
premium for covering huge risks. In case of huge claim, there is no other friend or
relative or even banks who will come to rescue of the borrower since he is no more
financially sound. At bad time involving financial crisis due to fire or flood or burglary of
stock it is only insurance company who will and can come to rescue of the borrower /
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policy holder if proper insurance coverage has been taken. Insurance company is your
best partner in times of need by insuring your losses at such a small premium.

Mostly, it is seen that the client is not involved in the process of obtaining insurance
policy. Proposal form is not filed up. Intension is not marked in the covering letter, as to
what is sought to be covered in the insurance policy. It is more of a formality for the bank
to obtain insurance policy against their mortgaged property.

Banks may have interest in a pa1cular factory where stock is financed and that also only
in finished stock. If loss takes place in raw material or in any other factory of the insured,
then such a loss is not covered in the policy.

Some stock might be with other fabricators or processors but these stocks cannot be said
to be covered in the policy, should loss take place because they are not at the insured
premises.

Banks comes to know of high stock only after month end and by that time if any
incidence takes place, then full coverage may not be there, since heavy underinsurance
will be applicable.

Should their be a loss and claim is not settled by insurance company due to one reason or
the other, the borrower cannot say that insurance policy was banks liability and hence
not his responsibility to settle bank liability. Bank will keep on charging penal interest for
short stock / excess borrowing. Bank may even resort to taking over the collateral
property or invoke personal guarantee of borrower. As such policy holder must look
minutely in the insurance policy whether it serves his purpose or risk coverage or not.


11.29. Bank assurance

Now a days lot of banks and insurance companies have joined hands to sell insurance
policies. But the banks do not have expertise to handle the queries of the policy holders
or advise them in case of a claim.

In many a cases premium charged for insurance policy issued by such bank assurance is
less than if separate policies were to be obtained singly/separately from the insurance
company. The banks / insurance companies gives huge discount ranging up to even 50%
for issuing mass insurance policies. This discount is passed on to the policy holders in
many cases. This discount cannot be availed if single policies were to be taken
individually. Such tailor made policies can be taken by common people at a lesser
premium if he is insurance educated and he knows exactly how to cover his risk and
properly handle the claims should their be a loss.

An account holder at say oriental bank of commerce can approach the bank to issue say
mediclaim policy out of its tailor made policies through oriental insurance co. Limited.
Being existing account holder of the bank he is eligible for the same. The premium can
be debited from his savings bank account. Had he taken separate policy it would have say
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cost Rs. 15,000.00 for his family of four for floater sum insured of Rs. 5.00 lacs, how
ever through bank assurance it would say cost him Rs. 10,000.00 at 33% discount and
same coverage. Such is the use of insurance knowledge. Similar group insurance policies
for house hold or personal accident policies can also be taken by the account holder at
discounted price and same risk coverage.


11.30. Further benefits of bank assurance

Mr. Verma runs a factory and is over occupied in executing his huge order. He has
already availed bank limit against machines and stock. All of a sudden flood takes place
due to heavy rain fall and blockage of drains or there is fire in the factory at night. He has
never believed in insurance policy and curses his bad luck. In the morning he meets his
bankers informing them about the incidence and his folly of not taking insurance policy.
His bank informs him that he is already insured through the bank to his surprise. There
are many such examples i have come across during my life. In such a case at least you
have insurance company as your saviour due to bank assurance in bad days.

11.31. Insurance premium pool

The insurance industry runs on the principle of accumulating premium from many to pay
claim of few. Say one thousand people pays premium of Rs. 100.00 each totalling to Rs.
1.00 lakh and out of this fund if there is a claim of Rs. 75,000.00 then it is paid out of the
total pool of Rs. 1.00 lakh.

The more the awareness of insurance spreads, the more policies will be issued resulting
more funds at the disposal of insurance companies to pay in case of claims. In this way it
will give boost to the insurance industry who can cover higher risks.

So far lot of people have risks to cover / assets to cover and they have funds to pay for
insurance premium but their is lack of insurance awareness and information. They are
afraid of insurance companies, thinking that in case of a claim, it will surely be rejected
by insurance companies. The average man is honest and wants to properly cover his risk /
asset against losses. He does not mind paying insurance premium whole of his life and
never suffer a loss due to fire / burglary. I think he will be the luckiest man that he did
not have to take insurance claim but he was always covered against unforeseen risk. In
case of a loss he should be able to resort to insurance claim since he had taken proper
insurance policy covering his assets by paying small amount as insurance premium. He
can now become an intelligent policy holder who has taken a suitable cover against risks
and knows in advance what to do should there be a claim.
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11.32. Insurable interest for own stock and held in trust

Insurance companies expect that insurer must have insurable interest in the property
insured by him. Either he should own it or he should have some sort of insurable interest
in it.

The policy holder can insure something in which he has insurable interest. One may have
interest in the stock purchased by him and insure it. In case of a claim due to say burglary
he has to prove by way of purchase bills that he is owner of the stock and he has taken
insurance policy for stock owned by him.

Similarly, stock received by him from someone for fabrication / some additional work /
processing can be insured by him since he holds it on trust. In case it is lost, he is bound
to compensate the supplier. As such, while lodging insurance claim he has to prove that
he has taken insurance policy for stock held in trust but not owned by him. E.g. M/s d &
company takes five computers on rent for use in business and fire destroys all the five
computers. M/s d & company can declare to the insurance company that they have ten
computers of their own and another five computers received on rent, thus held in trust by
him. Thus the risk increases to 15 computers.

No. Rate value
Pcs Rs. Rs.
- own computer 10 20,000.00 2,00,000.00
- held in trust 5 30.000.00 1,50,000.00

3,50,000.00


Thus d & company can take coverage of 15 computers worth Rs. 3.50 lakhs as per above
details. A simple letter to insure as above may be adequate.

Should another 20 computers be added during the policy period, he should ask insurance
company for additional coverage and sum insured by paying suitable premium.

At the time of taking insurance policy, policy holder may declare how much stock is
owned by him and how much stock is received by him for processing etc. For which he
needs insurance for stock held in trust. Separate declaration is required for stock held in
trust otherwise they are not deemed to be covered in the regular insurance policy. Stock /
machinery received for processing / repair are called stock held in trust in insurance
language.

11.33. Stock given in trust to others

The policy holder may be in a business of renting out computers to various clients. In
such a case he can also cover the computers in his insurance policy stating that they will
be in the clients premises at various sites as per agreement. In such a case the person
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who takes the computers on rent, need not cover them in his insurance policy since he is
being charged rent and insurance premium by the owner / lessor of the computers.

11.34. Temporary godown

It is observed that during policy period the policy holder may have to shift his godown
temporarily to new premises due to many reasons including repair of old premises, new
premises taken to store excess stock etc. In such cases it is utmost important to inform
insurance company in writing with acknowledgment apart from taking endorsement in
the policy after paying the necessary additional insurance premium. Item / value of stock
/ address / date of shifting / period of coverage sought, may mentioned in the covering
letter.

11.35. Excess clause

So as to avoid processing of small claims or so that policy holder also gets pinch of loss,
in some policies there is provision for deduction of minimum amount from the assessed
loss. This compulsory deduction is called excess clause or the minimum amount to be
borne by the policy holder. E.g. In fire claims Rs. 10,000.00 is minimum excess means
that if there is a claim up to Rs. 10,000.00 then insurance company would not pay any
claim. In case of claim of Rs. 90,000.00 after deduction of excess of Rs. 10,000.00, the
claim would be settled for Rs. 80,000.00.


11.36. Substandard

When there are certain violation of policy terms and conditions but the claim fully does
not merit repudiation. In such cases insurance companies can settle the claim on sub
standard basis e.g. at 75% of assessed loss is paid to the policy holder on sub standard
basis. This way court cases can also be avoided.

11.37. Automatic insurance with banks for stolen cheques/ theft from bank lockers

In case unsigned cheque is stolen and some one withdraws cash from your bank account
on the basis of forged signature, in that case one can lodge claim with the bank for the
amount of the cheque u/s 85 of negotiable instrument act. The bank is at fault and
deficient in service for cash payment against a cheque without order from the actual
account holder and is liable to compensate the actual account holder. The bank cannot
plead that the signature on the cheque was so accurate that they could not discover the
forgery or why the account holder did not keep the cheque book under lock and key or
why he did not discover loss of cheque in time. The bank cannot also argue that the
signature of the account holder has always little variation and they cannot be expected to
be hand writing expert or they have to pass say 1000 cheques within clearing time of two
hours leaving no time to cheque signatures in minute detail. The signature forgery can be
pictorial copy but forgery is forgery and bank is liable to reimburse the actual account
holder. Forged signature on the cheque can be established only by hand writing expert
appointed by bank or by police through central forensic science laboratory. One cannot
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easily prove author of the forged signature to arrest him for forgery unless caught red
handed at the time of encashment of cheque. Neither any purpose would be served in
blaming the bank staff for involvement in the forged withdrawal. In case of non
settlement of claim by bank one can approach the banking ombudsman for such claims
for early settlement in place going to civil courts.

Similarly banks are not liable for say jewellery contents of the bank locker. No purpose
would be served in blaming the bank staff unless caught by police for making duplicate
key or otherwise by bank staff. The bank would be liable if the bank locker is found
tampered or broken or found open and the contents are missing from it.

One should cover risk of his jewellery and valuables by taking suitable house holders
insurance policy for jewellery kept in the bank lockers as well as at home. Banks do not
accept any declaration for the articles kept in the locker; neither have they maintained any
stock register for locker contents.

These days cheque deposited in banks are stolen from the bank to encash else where.
Change the date, open a new bank account, remove account payee and endorse to a
forged bank account to encash. Writing bank account number of the payee and affixing a
cello tape on the amount and payee is as good as self insurance against fraudulent use of
cheques and drafts. e.g. Pay to Atul Gupta A/c No 2714 at SBBJ, Naraina Vihar, New
Delhi. Affix a cello on the payee. One can also write bank account number of the payee
on the reverse of the cheque and affix cello tape on the writing while depositing the
cheque in the bank. E.g. For credit to Atul Gupta A/c no 2714 at SBBJ, Naraina Vihar,
New Delhi if the cheque is simply payable to Atul Gupta.

Mere obtaining pay in slip with round stamp on it is no proof that the cheque was
deposited at the bank. The bank can always take the plea that such round rubber stamp
lies loosely in the bank through out the day. There are no signature of the staff who
received the cheque. Affixing of branch address rubber stamp on the reverse of the
cheque by the bank clerk is proof that the cheque was deposited with the branch in
clearing and there is no way to cancel the rubber stamp.

11.38. Preliminary report v/s main surveyor appointment

Surveyors are appointed as per financial authority, depending on claim amount.
Miscellaneous burglary claim up to Rs. 10,000.00 may be appointed by local branch
manager, while burglary loss up to Rs. 75.00 lacs may be appointed by general manager
at head office of the insurance company. The insurance surveyors are independent and
are not employees of insurance companies. They hold surveyors licence issued by
I.R.D.A. The insurance companies maintains panel of surveyors out of whom surveyor as
per suitable technical know how is appointed by insurance company to assess loss. In
case of loss to building civil engineer, in case of car claim mechanical engineer, in case
of burglary chartered accountant, in case of chemical loss chemical engineer, in case of
mediclaim doctor may be appointed as surveyor. Sometimes main surveyor appointment
is delayed since claim may be at a different places and needs immediate verification of
117 | P a g e

incidence of loss or physical stock taking, while as per financial authorities surveyors
appointment may take sometime since say H.O. / R.O.Is in different city.

In such cases preliminary surveyors is appointed by local insurance company. The duty
of preliminary surveyor is to visit the site immediately and take stock of the loss, take
photographs of say forcible entry, safe broken, stock taking of balance stock saved etc.
He may submit his report by the time main surveyor may join in.

11.39. Role of investigator in insurance claims

Many a times insurance company appoints investigator in case of complicated claim
which may need thorough investigation. The investigator may be retired police officer or
retired from C.B.I. Or experienced insurance surveyor. It may be noted that the role of
investigator is not to assess the loss but his findings may have impact on the assessment
of a loss.

Normally investigator goes deep inside the incident of loss to find out the root of the loss.
He may start with: -

Visiting the site
To find out whether such an incident had really taken place there. He may make a
map of the place. Visit nearby people/shops/road side people to find out exactly what had
happened and tries to get to the bottom of the case. Whether the claimed incidence is true
or fabricated. Had some one witnessed the incidence?

The police records, register of no. 100 call and the time of call from police log
book may be verified. The police jeep staff who had first responded to the call in
response to 100 call may be interviewed.

Family member/business associates/staff may be interviewed to find out financial
back ground/business of the claimant and its impact on the claim. Is the insured
financially sound enough.

Bank of the insured may be approached to find out bank dealings, whether there
was huge liabilities on the head of the insured.

The suppliers may be approached to find out authenticity of bills/suppliers.
Whether only bills were issued without sending goods e.g. 10 ton stock cannot be
dispatched without truck and its freight payment. Who had paid the freight may be
verified apart from investigation with the transporters.

The investigator will finally comment about genuinity of the incident in his
report. In case he finds any negative observation then he will go in deep and prove his
point of view duly supported by evidence. In case his observations are negative, then the
claim may be affected accordingly.

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Sometimes one may be in heavy debt and loan liabilities and in pressure to pay
his debts. Such people need to be examined whether the claim has been lodged or
exaggerated to help pay his loan.

In case of jewellery claim in household, it is to be investigated whether the policy
holder had the means to own the claimed lost jewellery.

The investigation report is considered by the final surveyor while finalising claim
assessment.

11.40. Avoid smaller claims

One should avoid smaller claims to improve image in the eyes of insurance company of
bad claim experience. One may be termed as bad client, if his claims are quite frequent.
Formalities of insurance company are same for small as well as big claim. To take
insurance claim is no joke/easy process. Plethora of formalities as already mentioned has
to be compiled with.

One must protect the property insured to the best of his capability.

Insurance policies can be cancelled by giving 14 days from either side. In case of heavy
claims ratio and frequent claims, insurance companies can cancel the policy.

At the time of renewal, insurance co. May not accept renewal premium if the risk is very
high or about to take place.

Insurance companies can load additional premium in case of bad claim experience.

To avoid processing of smaller claims and let the insured get pinch of the claim, excess
clause or co insurance clause is provided in the policy, so that insured has to bear some
portion of the claimed amount.

11.41. Follow one company for insurance

Insurance Cos are also there for business and earn reasonable profit. They always give
due regard to people who are their regular customers and pay substantial insurance
premium. As such it is always good to take all insurance policies from same insurance
company over the period and be their loyal customer. In a family all the policies may be
taken from the same insurance company. In case of business the associates, group
companies, all staff may be covered with the same insurance company. This way they
become good customer for the insurance company and due regard is given in case of
claim.

In business houses one may come across cases where the CMD/DGM/RM of the
insurance company goes to collect insurance premium cheques. A function is organized
when insurance company pays a cheque of insurance claim and local press is briefed
about quick disposal of claims.
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Insurance companies always compare how much insurance premium has been generated
from the group/person vis a vis the claim and claim ratio in a year or till claim period.
They always give due weightage where claim ratio is less. For example if one client/
group/ industry/ company had given say Rs. 25.00 lacs as insurance premium in one year
and they had been paid only Rs. 10.00 lacs by way of claims, it is a profitable venture
since profit of Rs. 15.00 lacs was generated from the client. What if the client had
resulted profit in crores. Such clients or policy holders are always chased by insurance
companies and are given best of service.

It is better to follow insurance company whose head office is in your zone. One can
easily approach the head office in case of big loss or problem in claim settlement.


11.42. Renewal of insurance with same company.

It is always better to renew insurance policy with the same company. This has many
advantages apart from loyalty.

Many a times initial policy is properly issued mentioning correct address, items covered
etc. And in subsequent renewal policies some error may have crept in. The insured gets
benefit of first policy if insurance continued with the same company. Some times same
policy containing error is taken over by some other company and then the problem starts
in case of claim with the new company. I have not come across many people who read
policies after issue of the same.

Policies should be taken without breakage in the policy period, so that benefits can
continue. In case of medical policies after a few years, even pre existing diseases are
covered.

With every renewal, one must explore the prospect of taking wider coverage, additional
securities measures etc. Renewal of policy after lodging a claim should always be done
with the existing company so that one gets benefit of loyal customer.

11.43. Claim settlement process

In the event of settlement of a claim after finalisation of survey report scrutiny of survey
report is done by insurance company at appropriate level.

Then voucher is sent to the insured in duplicate for sign/stamp/revenue stamp fixed.
Should there be bank lien in that case voucher may have to be discharged / signed by
bank also.


In case of burglary etc. Insurance company holds the right to obtain goods from the
police, if recovered later on after settlement of a claim. E.g. After a claim of Rs.
30,000.00 has been settled by the insurance company, the local police recover the stolen
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stock, in such a case the stock would be taken by the insurance company and not by the
policy holder who has already taken the claim. In this way insurance company enters
into the shoes of the owner and this is called subrogation right. After a claim is settled all
the rights are transferred to the insurance company.


Apart from voucher, indemnity bond and subrogation bond has to be given on stamp
paper of Rs. 100.00 before final cheque is received from insurance company. Matter of
these two bonds is provided by the insurance company, only amount has to be filled on it
and signed / stamped by insured.

In case the insurance policy was issued with bank lien clause i.e. Finance had been made
by the bank in that case cheque is issued in the name of bank a/c of the insured e.g. Pay to
say bank of India a/c Verma & co. Current a/c no 23445 at Naraina Vihar, New Delhi.

11.44. Adhoc payment against a claim

In case of large claims, sometimes it may take lot of time in police final
report/challan/court procedures. In such case if it is proved beyond doubt that the claim is
genuine, but claim settlement is pending for some formalities, insurance companies can
make ad hoc payment of say 25-50-75%.

On finalisation of the case with the police/court, the balance amount may be released.

This way business of the insured is not affected and insured is given timely relief by
insurance company. Insured may be able to restart his business faster and may not have to
pay bank interest on the loan taken.

11.45. Consent letter

Before finalising survey report, the surveyor may obtain consent letter from the insured
of having accepted assessed loss. This is of prime importance especially when loss
assessed is less than claimed amount. Dispute in quantification of loss would not be there
if consent letter is obtained from the insured.

Insurance companies do prefer to obtain consent letter from the insured before settlement
of a claim. This way they make sure that the claim assessment has been discussed with
insured in detail by the surveyor and there are no disagreements in assessment of loss.
This way court cases can be avoided.

Normal language in the consent letter is as follows:-

Addressed to the insurance company or to the surveyor

Subject: ---policy no, claim no., claim amount, date of loss, nature of loss, insured.

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we hereby give our consent if the above claim is settled for a sum of say Rs. 5.00 lacs in
full and final settlement subject to policy terms and conditions and that the claim
assessment has been discussed with us in detail and we agree with the assessment.

Signed and / or stamped by insured.

However in extreme cases, the policy holder can dispute the consent letter in court stating
that he had no option but to sign the consent letter. His claim was unreasonably delayed
and assessment has been done far below genuine claimed amount. Had he not signed the
consent letter the claim could have been further affected and/or he was under compulsion
to pay huge bank interest on loan liability from bank.

11.46. Letter to police to hand over future recovery to bank.
Before settlement of claim insurance company may ask the insured to get a letter
acknowledged with sign and stamp by concerned police station that in case of any future
recovery rights are with insurers.

To date
The S.H.O.
Police station

Sub. F.I.R. No. And date, policy no.
Subject: --- F.I.R. No. And date of F.I.R. And date of loss, policy no, claim no., claim
amount, date of loss, nature of loss, insured.

Dear sir,

The captioned claim has been settled by the following insurance company. In future if
there is any recovery kindly hand over the same to the insurers.

Name and address of the insurance company.



Thanking you,

Name and address of insured.

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11.47 whether to contest full and final claim payment

In case consent given, indemnity /subrogation bond given, full and final payment voucher
signed, and cheque received by insured, the insured cannot later on contest that he has
been paid less by the insurance company.
The insured should weigh all factors before accepting cheque in full and final settlement
of a claim even if the amount is far too short of his claim amount. Against a claim say of
Rs. 1.00 crore, the insurance say wants to settle the fire claim for Rs. 20.00 lacs only due
to under insurance, highly depreciated assets, non production some purchase bills, and
high value of salvage. There is loan of say Rs. 50.00 lacs on the factory of the insured. If
the claim is accepted, there is still out standing bank loan of Rs. 30.00 on the insured. On
the other hand if claim amount is not accepted, the bank may sell the factory land of the
insured for say Rs. 30.00lacs.

In such a case if the insured accepts payment of Rs. 20.00 from the insurance company
and feels that he was forced to accept less payment, he may not get relief from any
forum having accepted full and final payment and subrogation rights transferred to the
insurance company.

On the other hand if he does not accept full and final payment of Rs. 20.00 lacs, it may
take years to settle the court case, and the court may finally allow say only Rs. 25.00 lacs
as final claim. By that time the bank may not await court order and sell the factory land to
recover its NPA loan.

It is wise to pursue the insurance company at all levels for reasonable claim settlement
and give due proof in support of higher amount of claim before accepting full and final
payment. The insurance company may take lesser time to listen to reasons for higher
claim amount.


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11.48. Business of insurance company re-insurance
The insurance Cos receives premium in advance at the beginning of the policy period.
Should a claim arise, the insured is paid claim amount after completing all relevant
formalities. In this time gap from receiving the premium to settlement of claim, insurance
companies use the premium amount at no cost. This is why insurance business is so
lucrative all over the world. Rich people are involved in reinsurance business in which
insurance premium is taken by them by assuring share in the claim, its called re-
insurance. The cost of funds is nil till a claim is paid. In case of no claim, the funds
fully belong to the insurers or re-insurer. That so why insurance companies are some of
the biggest investors in the share market over long period of time. Some times their gains
from the share market is much more than the gains from insurance business of premium
verses claim settled.

11.49. Cancellation of insurance policy
The insurance companies or the insurer can cancel the policy at 7 or 15 days notice. The
balance unutilised premium may be returned. The insurance company does make such
cancellation in case of huge claim ratio, false claims, loss of trust of insured etc. In such
cases the insured has no option but to look for some other insurers.

11.50. Not having R.O.In cities.
Some insurance company are allowing even 1 crores sum insured under shopkeepers
policy so as to make insurance easy matter. However the process to settle a claim at D.O.
Level headed by divisional manager is not more than Rs. 4.00 lacs even if it is a claim of
fire. In some companies fire claim are also governed by miscellaneous claim power in
shopkeepers policy. To circumvent the situation, separate policies for burglary and fire
are issued. Thus even a fire claim of Rs. 10.00 lac would now fall within power of
divisional manager. Since now the claim would be settled by D.M. Under his financial
authority which is more in case of fire policy.

Thus the insured looses benefit of theft, C.I.T., infidelity, fire coverage and low premium
in shopkeepers policy.

In cities where regional officers are not situated people try not to take shop keepers
policy, since there are good chances of dealing in settlement of claim by their distant
situated R.O. If claim exceeds D.O. Level power.
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Chapter 12

12. Hierarchy of insurance companies.

A) - AAO
- Branch Manager
- Sr. Branch Manager

These people are at branch level.
Normally there is one or more branch under a divisional office. Development
officers handle marketing of policies at branch. Claims are processed at the
concerned policy issuing office. Final decision of a claim is given by
concerned authority as per financial power. Claims are referred to divisional
office only if claim amount exceeds financial authority of the branch incharge.



B) - Divisional Manager
- Sr. Divisional Manager

These people are at divisional office level.
The sr. Branch manager when posted at divisional office is called divisional
manager.
There can be one or more D.O. Under Regional Office.
Development officers handles marketing of policies at divisional office as
well. If policy is issued from the divisional office then claims are processed at
the concerned divisional office. Claims are referred to regional office only if
claim amount exceeds financial authority. The divisional office may also
refer a claim in case they seek technical input from regional office. Divisional
coordination committee (DCC) can have three members from the divisional
office to form DCC to handle claims beyond power of divisional manager.



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C) Regional office
- Asst. Manager
- Dy. Manager
- Chief manager+
- Regional manager
- Chief regional manager
- Dy. General manager

These people are at R.O.Level.
There can be several ro. Under head office.
Smaller R.O.Can be headed by chief regional manager and the bigger one by
dy. General manager. Some times important policies requiring technical
expertise are issued from regional office. The regional office may have chief
manager separately for miscellaneous claims or for fire claims. Claims are
referred to head office only if claim amount exceeds financial authority.
Regional coordination committee (rcc) can have three members from the
regional office to form rcc to handle claims beyond power of dy. General
manager.



D) Head office
- dy. Manager
- Chief manager
- Dy. General manager
- General manager
- Cmd
- Board of directors

These people are at head office
- The claims at h.o. Are dealt as per power/financial authority. At h.o. They
have chief manager /
Dy. General manager / general manager
Separately for miscellaneous claims or for fire claims. The head office is
the highest office so far as claim settlement is concerned. Head office
Coordination committee (hcc) can have three members from the head
office to form hcc to handle claims beyond power of cmd.

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12.1. Financial authority for misc. Claim settlement

Financial authority are little different in different companies. The claim are settled as per
final miscellaneous assessed loss recommended.




The above is an indication how insurance companies financial powers operate and are
always subject to change as per their notifications.





















Authority Amount
In Rs
AO Unto 10,000.00
AM/BM 20,000.00
SBM/DM 2,00,000.00
SDM/Manager 4,00,000.00
DCC 7,50,000.00
Chief Manager 10,00,000.00
RCC-1 15,00,000.00
Dy. General Manager 20,00,000.00
Rcc-2 (R.O.Headed by
DGM)

25,00,000.00
GM 75,00,000.00
CMD 2,00,00,000.00
Board /HCC Actual
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12.2. Financial authority for fire claim settlement






















The above is an indication of financial power to deal with fire claims.

The financial power may differ from company to company a little bit.
Authority Amount
In Rs

AM/BM . 2.50 lacs
SBM/DM 10.00 lacs
SDM/Manager 25.00 lacs
DCC 40.00 lacs
Chief Manager 75.00 lacs

RCC-1 1.00 crores

Dy. General Manager 1.50 crores
RCC-2 (R.O.Headed by
DGM)

2.00 crores
GM 4.00 crores
CMD 10.00 crores

Board /HCC Actual
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Chapter 13

13. What if claim not settled

If the policy holder is not satisfied about settlement of a claim, he has following doors
open to him:-

13.1. Consumer courts

Now a days even companies /commercial firms can also approach consumer courts
regarding deficiency of service by insurance companies including insurance claims.

Consumer courts can be easily accessed at any small town for grievances. Consumer
courts have their court in various parts of the country. These days their powers / limits
have been enhanced to cater to large cases. Quick disposal is given. They are now a
days time bound and one does not need help of lawyer, if insured so desires. For
important cases, lawyers can also be asked to represent.

The consumer protection (amendment) act, 2002 brought into force from 15
th
march,
2003

The consumer protection act, 1986 was encated to better protect the interest of
consumers. With globalisation of economy and enhancement of consumerism, the
importance of the act has multiplied under the act, consumer forums at districts, state and
national level are established to provide simple, inexpensive and time bound justice to
consumer complaints against any defect in goods or deficiency in services including
unfair/ restrictive trade practices adopted by any person.

The act was amended in 1991 and 1993 to make the consumer protection act more
functional and purposeful, a comprehensive amendment was carried out recently by the
government and brought into force from 15
th
march 2003. The amendment act is
expected to greatly strengthen the consumer movement in the country.

Highlights of the important amendments

Revision of pecuniary jurisdiction in respect of redressal agencies at different
levels, i.e.,

District forum : up to Rs. 20.00 lakhs

State commission : above Rs. 20.00 lakhs
Up to Rs. One crore

National commission : above Rs. One crore

Provision for issue of interim orders by redressal agencies.
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Prescribing time-frame for admission, issue of notices and disposal of complaints/
appeals.
Provision for service of notices by courer, fax, speed post etc.
Provision for senior most members to preside the consumer forum in the absence
of president for any reason.
Provision for creation of benches in the national commission and state
commissions and holding of circuit benches.
Recovery of compensation amount ordered by the redressal agency through
certificate case in the same manner as arrears of land revenue.
Establishment of consumer protection council at district level.


List of documents required in case of consumer complaint;-

1. Index
2. Complaint with affidavit
3. Supporting documents in favour of complaint e.g. Survey report, policy copy,
letter from insurance company etc.
4. Limitation (2 years from cause of action)
5. Required fees.

Note: no. Of copies to be filed
1+3 copies + no. Of opposition parties
(with file cover)


One can log on to www.ncdrc.nic.in to locate the consumer redressal forum in your area.
National consumer toll free help line 1800 11 4000

Address of ministry of consumer affairs

Department of ministry of consumer affairs
Krishi Bhawan, New Delhi 110001
Web site www.fcamin.nic.in




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13.2. Insurance ombudsman

- To avoid long delays in courts, ombudsmen have been appointed in various
states to sort out cases pertaining to insurance. The decision of the
ombudsman is binding on both the parties viz insured and insurer. How ever
the insured if not satisfied can go to other forums for his grievances.

- Quick disposal of files is given by insurance ombudsman.

- The only demerit is that the office of ombudsman is only in few capital cities.
It is difficult for far off places policy holders to visit their office.


- On need not take help of lawyer to contest his claim in the ombudsman office.
Mere representation is enough.

Who can approach? (a) any individual insurance policy holder (or his legal heirs)
who has taken insurance on personal lines e.g. Personal accident insurance,
insurance of property of the individual such as motor vehicle, household articles
etc., and mediclaim insurance (not for partnerships, co-operatives, association,
trusts, etc.)
(b) Sole proprietor (if the policy stands in the name of the proprietary concern).

Complaints pertaining to repudiation of claims totally or partially, delay in
settlement of claims, any dispute on the legal construction of the policies in so far
as such disputes relate to claims, disputes regarding premiums paid/payable and
non-issue of insurance documents are covered.

How to approach?

The complaint can be given on a plain paper. When the complaint falls within the
terms of reference, the ombudsman will issue prescribed forms to the
complainant.

Non-renewal of a policy by the insurer cannot be represented.
No fees/charges are required to be paid.
No lawyer required.
Time limit: within one year of the rejection by the insurer of the representation
of the complaint or the insurers final reply to the complainants representation.
If youve already complained to the consumer forum, you cant approach the
ombudsman.
The complaint amount should be upto Rs. 20.00 lacs only.
Before approaching the ombudsman the insured should have made representation
to the insurance company and received a reply which is not acceptable to him or
there is no reply within a month.
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Complaint with the ombudsman can be filed against private or public sector
insurance companies.


13.3. What to do in case of delay in settlement of claim

In such cases insured should approach divisional office, regional office, head office with
his grievances. Going to court should be the last option and not the first. There are
grievances cell at different levels in insurance companies.

Insurance companies do organise claim clearance week at regional office level. One can
approach them in case of delay in settlement of claim during this period when special
emphasis is made to settle deserving cases.

- A claim may have been repudiated or lesser amount may have been paid by the
insurance company. The insured can approach the grievance department of the insurance
company for reconsideration of the claim. Letter with full facts may be addressed to the
deputy general manager / chief regional manager at regional office or chair man cum
managing director at head office of insurance company.

-normally every Thursday of the month one can approach the region head for
grievances matters.


13.4. Arbitration

- The insured if not satisfied about claim settlement, can ask for arbitration. A
committee is constituted for hearing grievances and suitable decision is given
by the arbitration committee.

- This way delays in court etc. Can be avoided.

- Arbitration request is made at head office of the insurance company.

- These requests are beneficial where large seems are involved and apparent
technical error has been made by insurance companies in settlement of claim.











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13.5. Right to information act ( R.T.I.)

These days R.T.I. Is an important tool to enforce rights of insured. Each insurance
company is supposed to have a public information officer at head office. Application can
be made by paying Rs. 10.00 as application fees by demand draft drawn on public
information officer.

The four nationalised companies have their head offices at respected cities and
accordingly application of R.T.I. has to be made at their head office who in turn asks the
concerned branch/divisional office/regional office to provide necessary details related to
the claim as requested.

Under RTI one can ask why his claim is being delayed. One can ask for reasons of
rejection of claim, policy copy, proposal form copy, any amendment made in policies,
basis of insurance, preliminary survey report copy, final survey report copy etc. These
papers can be obtained by paying nominal fees for photo copies as asked by public
information officer of the insurance company.

13.6. Insurance regulatory and development authority,

One can approach IRDA at Hyderabad to persuade insurance company to provide survey
report, early settlement of claim, and wrong issue of policy resulting rejection of claim.
The representation can be made in specified format or by a letter.

IRDA is a regulatory body constituted under insurance act. They have direct control over
insurance companies.

13.7.Rights of policy holders to obtain a copy of survey report under IRDA rules

If the policy holder is not satisfied with the assessment of a claim, they can ask for a copy
of survey report from the surveyor or concerned policy issuing office. As per IRDA,
insurance company is supposed to provide copy of survey report to the policy holder on
demand.
As per the insurance regulatory and development authority (protection of policyholders
interests) regulation, 2002.

a copy of the report being furnished to the insured, if he so desires.

13.8. Ministry of public grievances
Policy holder can approach for his grievances against dissatisfaction in settlement of
claims through the ministry of public grievances at New Delhi. There are no charges and
simple application in format is enough.

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13.9. Ministry of finance
Policy holder can approach the ministry of banking and insurance under ministry of
finance for his grievances against all matters relating to general insurance companies in
the country including settlement of a claim.

Insurance division
Director of public grievances
Ministry of finance
Department of economic affairs
Jeevan deep building,
Parliament street, new delhi 110001
E mail : gbhujbal@hub.nic.in
Phone 23365809, fax 23344605

The ministry of banking and insurance controls all the insurance companies and can ask
for replies from insurance companies against grievances of a policy holder.

13.10. Civil courts
Finally civil courts are last resort to sorting out claim related matters. There are courts all
over the country. The only problems are of delay. As such all other avenues should be
exhausted before approaching civil courts.

Moreover 1% of claim amount may have to be deposited as court fees. Court fees is not
refundable. In case of big claims court fees can be substantial. In case of consumer
courts fees is very small.
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Conclusion

Preface as conclusion

Had I not read the book I would have said I had lodged a fire insurance claim and it was
turned down by the insurance company. The address where the loss took place was not
covered in the policy. I had shifted to the new premises, without informing the insurance,
a week before the loss took place. I must admit the insurance company has all the rights
to repudiate my claim, since I never treated them with the importance they deserved. I
took the bank very seriously but not the insurance company. Now I am paying to bank
double instalment for old loan restructured after fire and new loan on my new factory
constructed after fire. This is what would have happened had I not read the book.